Patrick Doyle | Bloomberg | Getty Images
The Bank of Canada (BoC) senior deputy governor, Carolyn Wilkins, pictured on the left with governor, Stephen Poloz, has said the country will not be using blockchain technology on its national payment infrastructure.
The Bank of Canada (BoC) has said no to using distributed ledger technology (DLT), also known as the blockchain, after a year-long investigation into whether it could provide the underlying infrastructure for the country’s interbank payment system.
The central bank’s negative viewpoint on the suitability of DLT was published in a column in The Globe and Mail newspaper yesterday, where the BoC Senior Deputy Governor Carolyn Wilkins and Gerry Gaetz of Payments Canada, the country’s payment and settlement operator, concluded that “too many hurdles” had to be overcome for a blockchain-based infrastructure to be viable.
However, the authors did add it may be possible to use blockchain technology in the future “one day” for the country’s payment technology backbone.
Canada’s central bank has been working on Project Jasper with the country’s largest banks, Payments Canada and the R3 consortium on the DLT experiment since last summer. It used a digital fiat currency called Cad-Coin to explore the suitability of the technology but ultimately concluded there were too many concerns about privacy; resiliency, as the ‘chain’ would present a single point of failure; and its scalability.
“The bottomline is that a standalone distributed ledger technology wholesale system is unlikely to match the efficiency and net benefits of a centralized system,” wrote the authors in the Globe and Mail article. “In fact, at its heart, there exists a fundamental inconsistency or tension between a centralized wholesale interbank payment system, as we have now, and the decentralization inherent in DLT.
“At the end of the day, interbank systems must be safe, secure, efficient and resilient, and they must meet all international standards,” continued the authors. “DLT-based platforms are just not there yet.”
The conclusion means that the Canadian financial industry will stick with the present payment system modernization roadmap that it has. This revolves around a new clearing and settlement system that uses a traditional centralized core that all the banks and payment providers will link to and the adoption of the international ISO 20022 messaging standard.
The ISO 20022 global messaging standard aids cross-border interoperability and has enough characters to allow more data to be stored in payment messages than has traditionally been the case.
ISO 20022 data-rich payments can provide valuable tracking, accounting, counterparty and other useful data, alongside the instruction to transact a payment.