Bank of Canada, Payments Canada, TMX Group Succeed in Phase III of Blockchain Trial

Bank of Canada, Payments Canada, TMX Group, Accenture, and R3 announced the completion of phase 3 of their Project Jasper blockchain trial.

Blockchain-oriented Project Jasper has recently completed its phase 3. The project members, which include the Bank of Canada, Payments Canada, stock exchange operator TMX Group, blockchain developer R3, and professional services firm Accenture, delivered their conclusions in the Jasper Phase III Report published on Monday. The key findings after the one-year trial phase indicate that blockchain has been proven feasible at clearing and settling securities.

While the previous phases of the trial project revolved around the use of blockchain for clearing and settlement of high-value interbank cash payments, the recently completed phase touched upon an integrated payments and securities system. The experiment didn’t reveal any significant benefits at this point, but this might be due to the fact that the results were compared to the current sophisticated, interconnected systems. 

Scott Hendry, Bank of Canada’s senior special director of Financial Technology, commented:

“DLT is a promising technology that has the potential to reduce costs for participants and open new opportunities. Phase III of Project Jasper gave us the opportunity to test the technology further, and work remains to be done to determine how it can be set up to maximize the benefits for the whole financial system.”

Project Jasper explored settlements and payments conducted through a private blockchain network by developing and trialing a proof of concept (PoC) protocol integrated into existing infrastructure. During Phase 3 of the project, which lasted about one year, both securities and cash went through a tokenization process to achieve delivery versus payment (DvP) – a common type of settlement for securities. The securities and cash were moved on the Corda-powered blockchain via digital depository receipts (DDRs), which were issued by the Canadian Depository for Securities (for securities) and the Bank of Canada (for cash). The procedure enabled PoC members to settle simulated securities against simulated central bank money on the blockchain. Given that on-ledger transactions were final and irrevocable, the DDRs could be redeemed or re-used right after their transfer.

The project focused on company stocks listed on the Toronto Stock Exchange (TSX). The report was quite positive about the DvP process done through the tokenization of real-world assets like securities and cash and hinted that it would make sense to further explore this aspect.

The parties agreed that, if implemented on a wider scale, the distributed ledger technology (DLT) – an umbrella term that also includes blockchain – would help mitigate counterparty risk and free up collateral.

The 36-page report concluded that a blockchain-based platform could be successfully be used for a payment and securities settlement infrastructure. The trial demonstrated that the PoC was capable of processing pledge, transaction, and redemption of cash and stocks according to the privacy and scalability standards in Canada. The technology ensured that each participant could act based on authorized moves only.

Andrew McCormack, CIO of Payments Canada, stated:

“We are pleased with the Phase III outcomes and the results achieved by bringing members of Canada’s financial market ecosystem together, including TMX, financial institutions and the Bank of Canada.”

“Our results demonstrate the need to continue to broaden the scope of Project Jasper and actively explore what opportunities and challenges DLT could offer in the integration of financial markets and for the Canadian economy,” he added.

In October of last year, we reported that Bank of Canada, Payments Canada, and TMX Group were ready to start phase 3 of Project Jasper. At that point, the central bank of Canada was not convinced about the real benefits of the blockchain, but today the parties are more optimistic about the technology.

John Lee, a managing director of TMX’s Enterprise Innovation & Product Development, commented:

“Project Jasper findings offer critical insight to understanding how we can adapt as an industry to a rapidly evolving global financial ecosystem. There is more to be explored to define how this technology will best serve the capital markets space. We look forward to the continued narrative.”

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