The Central Bank of Canada will be testing the integration of payments and securities transactions with a blockchain platform, a move announced by the exchange operator TMX Group. This development is part of a joint project that involves the Central Bank of Canada, Payments Canada, and TMX Group.
The experiment represents Phase 3 of the Bank of Canada’s Project Jasper, which was launched in 2016. The previous phases dealt with high-value payments between banks based on blockchain technology.
Despite the fact that the final verdict showed that the distributed ledger technology (DLT) could not compete with the advantages of a centralized system, the Bank of Canada wants to go further and assess blockchain’s potential from different viewpoints.
Carolyn A. Wilkins, Senior Deputy Governor of the Bank of Canada, said that the DLT experiment is an effort to modernize the securities settlement infrastructure, which may bring stability:
“Our involvement in this effort to explore potential ways to modernize the securities settlement process is a good example of how the Bank of Canada promotes the efficiency and stability of the financial system. A better settlement process would not only reduce the cost of securities transactions, but also support financial system resiliency, especially in periods of stress, through faster settlement times and reduced settlement risk.”
Gerry Gaetz, President and CEO of Payments Canada, commented on the next phase, saying:
“This experiment continues to push boundaries, so it is exciting to move into a third phase with a broader scope and another partner. We continue to learn by applying distributed ledger technology to a wider set of functions within our financial system.”
He added that the current phase would focus on developing a proof-of-concept for the clearing and settlement of securities transactions by applying the cash-on-ledger model.
More information about Project Jasper’s Phase 3 is expected to come at the Payments Canada Summit in Toronto, planned for next year on May 9-11.
TMX Group, an exchange operator that runs the Toronto Stock Exchange, will collaborate with the Bank of Canada and Payments Canada to build the blockchain-based infrastructure that will support securities settlement operations.
John Lee, Vice President and Head of Innovations & Enterprise Delivery at TMX Group, said:
“It is vital to explore a financial ecosystem that leverages innovative technologies to optimize the business transaction process for all Canadian investors. We believe industry collaboration among key stakeholders across Canada's capital markets is critical to the success and long-term viability of this project.”
Earlier, we reported that the Royal Bank of Canada was experimenting with blockchain for interbank payments to US banks. The bank developed its own DLT system with the assistance of Hyperledger.