Bank Of Canada Backs Off Blockchain
On May 25, 2017, BOC senior deputy governor Carolyn Wilkins and Gerry Gaetz of Payments Canada, a Canadian payment and settlement system operator, published their conclusion that many hurdles must be overcome before blockchain infrastructure can support the central bank.
This is a reflection of the position that was previously taken by Canadian officials on Project Jasper. The project was an initiative to settle bank transactions on a blockchain using CAD-Coin, a digital alternative to the Canadian dollar. Prior to the outcome of Project Jasper, officials concluded that regulatory measures are necessary to make cryptocurrencies safe.
During the now concluded study, the BOC found that the Jasper Project could settle wholesale payments and lower back-office reconciliation expenses. Unfortunately, fixes to problems revolving around privacy concerns caused vulnerabilities in BOC's deployment of the distributed ledger technology (DLT) payment system – namely, leaving it susceptible to a single point of failure.
Another obstacle that must be overcome is the issue of scalability. Moving away from a fully decentralized network may boost transaction rates, but BOC reported that networks experience reduced resilience as a result.
The elements at play in Project Jasper proved to be a determining factor for BOC's decision to dismiss the technology for the time being. Still, BOC has a short-term goal of modernizing its payment system, albeit without blockchain technology.
According to BOC, it may consider utilizing a DLT system in the future for its wholesale market, but for now, the technology must advance to meet international safety, security, resilience, and efficiency standards.