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.