In 2016, the Bank of Canada launched Project Jasper. Ambiguously named, it was also new in nature and explored the use of distributed ledger technology (DLT) –the infrastructure underpinning the world’s first cryptocurrency, bitcoin.
It was the first project by a central bank examining DLT, and was arguably a watershed moment for the community. Since then, the floodgates have opened and central banks worldwide are exploring whether the technology could be used to streamline a number of processes.
Behind the Bank of Canada’s project was its fintech working group, which has been awarded Central Banking’s FinTech & RegTech Pioneer Award. Formed of economists and IT specialists, the group has been tasked with advancing the central bank’s understanding of fintech and the impact it will have on the responsibilities of central banks.
The Bank of Canada already has a strong research culture, and the working group has been able to leverage in‑house expertise and build cross‑disciplinary teams that work alongside each other and with external parties from the private sector, academia and the wider central banking community.
The group’s initial work focused on payments – more specifically, electronic payments – but this has evolved to include wholesale and interbank payments. This is where Project Jasper came to the fore.
The project has undergone two phases and is currently undergoing a third. The first two explored whether DLT could be leveraged for the clearing and settlement of high‑value interbank payments. Phase three is exploring the potential benefits of integrating the framework designed in phases one and two into other assets such as securities.
The project has taught the Bank of Canada and private sector partners how to understand the benefits and costs of DLT, as well as its potential usefulness in the design of a retail central bank digital currency (CBDC). The question of whether central banks should issue CBDCs has, as a result, become a core component of the working group’s function over the last few years.
The working group has also taken a broad approach to the technology, which could underpin a CBDC, casting the net wider than DLT. To assist, the working group has liaised with the Monetary Authority of Singapore and the Bank of England on DLT, and with the Massachusetts Institute of Technology on CBDC.
More recently, it has been pushing projects forward surrounding machine learning and artificial intelligence, particularly in terms of how they are changing the financial sector and how central banks could utilise the technology.
The Bank of Canada’s work on DLT, cryptocurrencies and CBDCs has undoubtedly set the bar high for other central banks worldwide.