Abstract
This paper examines Distributed Ledger Technology (DLT), a type of blockchain technology poised to transform central banks. The potential impact of disruptive Blockchain/DLT technologies on central banks worldwide is unimaginably large and would have significant implications for financial and monetary transactions and economic stability. Strong public interest in cryptocurrencies such as Bitcoin has popularized the term blockchain/DLT. The goal of DLT is to remove the costly and time-consuming back-office processes and the need for third-party ‘middlemen’ in many transactions. The core question addressed in this paper asks, what is the potential impact of DLT on improving central banks’ performance? To address this question the paper presents as a case study the major findings from the Bank of Canada’s Project Jasper which consists of four phases. The first two phases explore and compare two distinct DLT Platforms; an Ethereum platform and the R3 Corda platform. The four-main areas of focus for guiding hypotheses in Phase I is cost, resilience, accessibility, and control, while Phase 2 focuses on improvement in regard to privacy. Phase 3 explored the potential role for DLT in the Canadian financial market and determine if the new business value in terms of greater speed and efficiency can be achieved through the DLT-based automation of the securities settlement process. Phase 4 focuses on managing issues in the cross-border payment and settlement space because of the lack of standardization between jurisdictions in terms of regulatory requirements, data standards and operating hours. The overall analysis of Bank of Canada innovations into DLT noted challenges of security and privacy but the key challenge is moving from highly complex centralized payments systems to new near-real-time payment platforms.
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I appreciate the insight from Mr. Scott Hendry, Senior Director Financial Technology for the Bank of Canada. The views expressed in this chapter are those of the author and do not reflect the views of the Bank of Canada or its staff.
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Reddick, C.G. (2021). Analyzing the Case for Adopting Distributed Ledger Technology in the Bank of Canada. In: Reddick, C.G., Rodríguez-Bolívar, M.P., Scholl, H.J. (eds) Blockchain and the Public Sector. Public Administration and Information Technology, vol 36. Springer, Cham. https://doi.org/10.1007/978-3-030-55746-1_10
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