opening remarks by francois groepe, deputy governor of the south african reserve bank, at the launch of the project khokha report sandton convention centre, johannesburg 5 june 2018 good afternoon, ladies and gentlemen. on behalf of the south african reserve bank ( sarb ), i would like to extend a sincere and warm welcome to everyone here today on the occasion of the launch of the report on project khokha, which had as its scope the trial of interbank wholesale settlement using distributed ledger technology ( dlt ). this was our first dlt initiative ; its aim was to contribute to the global initiatives that assess the application and use case for dlt. i am pleased to confirm that project khokha was successful in that it proved that the typical daily volume of the south african payments system could be processed in less than two hours with full confidentiality of transactions and settlement finality. this was done using iso1 20022 standard messages within two seconds across a network of distributed nodes and with the requisite resilient distributed consensus. the sarb is pleased that so many of you have taken the time out of your busy schedules to join us today. we appreciate that there is great interest in this work, both locally and from abroad. 1 international organization for standardization page 1 of 4 i will make brief introductory remarks and then hand over to the governor of the sarb, mr lesetja kganyago, to deliver the keynote address. my remarks centre around three observations. barely six months ago, i could not have imagined that we would successfully trial the use of dlt to process high - value transactions. this was in part because i am acutely aware of the challenges involved in building wholesale payments capabilities and appreciate that, and proofs of concept can be both complex and take time to develop. as an example, the requirements for such an endeavour need to be carefully defined, prioritised, and mapped into functional and technical specifications. furthermore, the coding, development and testing required is an intense and laborious exercise. add to that the challenge of integration between multiple participants one comes to an appreciation why such initiatives are often multi - year projects. the design, building and delivery of project khokha happened in less than three months. this is a noteworthy achievement. it is evident that the pace of innovation and technological development requires a shift to this new ‘ agile design approach ’ which demands fast turnaround. after all, the mantra of financial technology, or ‘ fintech ’

, the less the banking sector spurs growth and the more capital market financing comes into play. also, market - based financial systems help to take the sting out of recessions that follow in the wake of financial crises. bank - based financial systems, meanwhile, are more adept at evening out “ normal ” cyclical fluctuations. however, the latest financial crisis has opened up another vista. a system in which the real economy is wholly reliant on a single source of financing – be it the banking sector or the capital market – will run into difficulties when that well runs dry. so, at the end of the day, it ’ s not a question of choosing either one or the other. the idea behind the european capital markets union is not to give up on bank - based financing, but to harness capital market financing as an add - on. and europe still offers plenty of potential in this respect. measured in terms of economic output, the us equity market is more than oneand - a - half times the size of its european counterpart, while the us venture capital market is five times the size of that in europe, and the us securitisation market is larger still than the european market. it ultimately all comes down to the old economic adage that you shouldn ’ t put all your eggs in one basket. or, to couch it in rather more technical terms, it ’ s all about diversifying the sources of corporate financing. if we give the capital markets a more prominent role in funding the real economy, that will give businesses broader and better access to funding – to the notable benefit of small and medium - sized enterprises. what it will also do is create a more efficient financial system that can better support sustained economic growth. 4. integration – establishing a single capital market the second objective of the european capital markets union is to deepen the integration of the capital markets. what benefits do integrated capital markets have to offer? one of the biggest advantages, undoubtedly, is that they can help to improve risk sharing. the underlying technical question is this : to what degree does an economic shock impair private consumption? and this is where the capital markets perform a key buffer function. in the usa, for example, the integrated markets for capital cushion around 40 % of total cyclical fluctuations between the us federal states. if a negative shock hits an industry or a specific region, then this loss is spread widely beyond that region. but in return, shareholders throughout the country also receive a share of the profits