The Bank of Canada (BOC) ruled on Thursday that distributed ledger technology (DLT) is not quite ready to be used to handle a national interbank payment settlement system.
Aside from the banking industry, insurers have also been looking into implementing DLT such as the use of a blockchain system to process settlements.
The BOC reached its conclusion after the trial of a DLT system, codenamed “Jasper,” which sought to determine whether DLTs could be used to improve Canada’s wholesale interbank payment system.
“A pure stand-alone DLT wholesale payment system is unlikely to match the net benefits of a centralized wholesale payment system,” the BOC said in a report.
Reuters reported that Jasper tested two types of distributed ledger platforms. One was based on “Ethereum,” which the bank noted made the system more resilient but was costly and raised privacy issues. The other platform used “Corda,” which addressed some of the previous concerns but left the system less resilient.
The tests were conducted with the aid of Payments Canada, which runs the national interbank payment system, together with assistance from the country’s major banks.
“DLT is probably not going to push the current systems out of the way,” said BOC managing director Grahame Johnson at a presentation of Jasper’s results in Toronto. “But it did open up a whole bunch of avenues for more work.”
“Blockchain is not a solution to every problem,” MIT Sloan School of Management assistant professor Christian Catalini told Reuters. “The potential here is in the future – we’re talking five or more years.”
Time will tell whether the insurance industry will come to the same conclusion, or would attempt to harness DLT in a different manner.
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