Canada’s central bank likely won’t launch a wholesale payment system based solely on distributed ledger tech, one of its senior officials said today.
Writing in an op-ed published by The Globe and Mail, Bank of Canada senior deputy governor Carolyn Wilkins wrote that while the tech could underpin such a system “one day”, issues that presented themselves during its Project Jasper initiative showcased the “many hurdles to overcome”. The central bank unveiled its work with the tech last summer.
She went on to write:
“The bottom line is that a stand-alone DLT wholesale system is unlikely to match the efficiency and net benefits of a centralized system. 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.”
Among those obstacles: privacy. Wilkins wrote that, while a privacy solution was later incorporated into the ledger system, “the fix made the system susceptible to the risk of a single point of failure” – a state of affairs that she argued wasn’t in line with some of the tech’s core characteristics.
The number of transactions the system could process also proved problematic, according to Wilkins.
“Another hurdle was scalability, which is still an issue in some versions of DLT. While other versions can achieve greater transaction rates by moving away from a fully decentralized framework, this can reduce resiliency and lessen some of the expected potential cost savings,” she wrote.
Her op-ed included new details from the initiative’s progression – Wilkins wrote about Project Jasper in February – while also noting that at least some of its elements could be applied elsewhere.
“There are a host of further avenues that may be worth exploring, and these sorts of experiments offer a collaborative way forward to do just that,” she wrote. “Our present view is that the biggest net benefits, if any, would likely lie in the interaction of a DLT-based wholesale payments system with broader financial market infrastructure.”
Wilkins went on to conclude:
“While these represent opportunities further down the road, Canada’s payments system needs to be modernized in the short term. Though it won’t involve distributed ledgers, it will involve a lot of innovation and collaboration.”
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