The Bank of Canada wants improvement to the core payments systems used in the country’s financial system in order to make them more dynamic and competitive, a top central bank official. New technologies in financial services had the possibility to transform the financial system but stressed institutions and policymakers must work together to protect against potential risks. Recently, the central bank confirmed that it is experimenting with a payments system based on the distributed-ledger technology behind Bitcoin.
Distributed ledger technology establish a shared database in which participants can trace every transaction and is closely associated with the digital currency. But the potential is stronger for other applications, pointing to test cases related to payments and post-trade processes. Several issues with the technology need to be addressed before its benefits can be realized, such as gaining regulatory acceptance and legal compliance. The bank is studying digital currencies closely and is researching the conceptual merits of issuing electronic money itself.
For the time being, the bank’s priority is to see improvements made to the Large Value Transfer System and Automated Clearing Settlement System that the bank oversees. The systems are operated by Payments Canada, the organization Senior Deputy Governor Carolyn Wilkins addressed in Calgary. These systems have served us well, but both require investments that are needed to fully meet our oversight requirements.
Wilkins said the bank is studying digital currencies closely and is researching the conceptual merits of issuing electronic money itself.Richer data on transactions in both systems needs to be collected and ideally make the two inter-operable.