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Bank of Canada trials blockchain-based digital dollar

16 June 2016  |  16465 views  |  3 light bulbs

The Bank of Canada has been working with the country's biggest banks and the R3 consortium on a blockchain proof of concept that uses a digital fiat currency dubbed Cad-Coin.

In a session during the Payments Panorama conference in Calgary, the central bank's Grahame Johnson, Royal Bank of Canada's Carolyn Burke and Payments Canada's Jan Pilbauer gave a rundown of the experiment.

Although closed to the media, the Bitcoin Alliance of Canada's Kyle Kemper posted slides from the discussion online which showed how a distributed ledger settlement platform called Jasper is used to issue, move and settle central bank assets via Cad-Coin.

The system sees participants pledge cash collateral into a special pooled account held by the BoC, which then converts it to generate the Cad-Coin, which is transferred to fund participants' accounts. Then identifiable counterparties can exchange assets on the Cad-Coin platform and redeem the digital currency for cash collateral, with the BoC destroying the redeemed Cad-Coin.

Speaking at a later conference session, Payments Canada CEO Gerry Gaetz confirmed that his organisation is working with the BoC, R3CEV consortium and the big five banks on Jasper but was keen to stress that this is a tightly controlled proof of concept experiment.

The technology is only being used for interbank payments, with Carolyn Wilkins, senior deputy governor, BoC, telling the Financial Times that "none of our experiments are to develop central-bank issued e-money‎ for use by the general public".

Nevertheless, the news marks a significant step in the evolution of blockchain. While several central banks - including the Bank of England and US Federal Reserve - have publicly discussed the idea of a fiat digital currency, Jasper is the first confirmed example.

Comments: (3)

A Finextra member
A Finextra member | 16 June, 2016, 20:30

That sounds a lot more sensible than the MUFG story a few days ago.

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A Finextra member
A Finextra member | 17 June, 2016, 13:22

can this be hacked like the DAO just was? https://www.finextra.com/newsarticle/29057/dao-hack-sparks-crypto-currency-panic

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Tanurag Nayyar
Tanurag Nayyar - EY - London | 18 June, 2016, 18:59

Would the same result not be easily achieved had the central bank applied each transaction real-time in the existing domestic automated clearing house scheme instead of waiting for the typical settlement windows? I can't really see the advantage of blockchain in this particular use case. It just looks like a desperate attempt by a bank to demonstrate that they could have a story in BC while still tying the value back into fiat currency. Eye wash!

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