The Bank of Canada (BoC), in collaboration with Payments Canada, TMX Group and Accenture, has demonstrated the feasibility of instantaneous equity settlement through distributed ledger technology (DLT).
The Canadian central bank, Payments Canada, R3, and TMX group came together for a blockchain-focused collaborative research initiative – Project Jasper – back in 2016. The participants intended to trial a DLT-based integrated securities and payment settlement platform.
The previous phases of the project focused on exploring the potential of DLT for clearing and settlement of high-value interbank cash payments. The second phase was completed last year. Jasper III builds on the previous work and explores DLT potential for broader Canadian financial market infrastructure.
Jasper III is a proof of concept (PoC) delivered by Accenture, leveraging R3's Corda DLT platform. It explored an integrated payments and securities infrastructure and showed for the first time that both central bank cash and assets can be tokenized to complete an instant, end-to-end equity settlement on DLT.
"This proof of concept shows that it is possible to deliver payments in a way that has never been done before – by directly swapping cash from buyers to sellers, resulting in instant settlements," said Gerry Gaetz, President and CEO of Payments Canada.
According to the official release, the PoC allowed clearing and "delivery versus payment" settlement immediately, showing that it is possible to complete post-trade settlement on a DLT platform. It also ensured privacy for market participants and their transactions – only the parties involved in specific transactions had the ability to view the transaction history.
Moreover, the ability to settle transactions immediately significantly reduces counterparty risk and frees up collateral.
"Maintaining privacy, as well integrating other assets onto the same ledger as payments, would provide important benefits for the financial system from the use of a DLT-based wholesale payment system," said Carolyn A. Wilkins, Senior Deputy Governor at the Bank of Canada. "Indeed, a key lesson from prior phases of Jasper was that the benefits of a DLT-based wholesale payment system likely lie in its interaction with the broader FMI ecosystem. Such benefits would come from reaping economies of scope and reducing costs to participants."
