Bank backed Blockchain fintech development consortium R3 (R3CEV LLC) is working with the Bank of Canada and the Canadian Payments Association on a Blockchain powered payment transfer system, it was revealed Thursday.

The Bank of Canada, Canada’s central bank, said that at this point they are only experimenting with the technology with the ultimate aim of building an interbank payment system that would replace existing legacy systems.

Of interest, the experimental system also includes a digital fiat currency called CAD-COIN that would be used to transfer payments between banks; under a future system banks would pledge cash collateral in a pool that the Bank of Canada would convert into a digital version with the digital currency then being used as a medium of exchange that could then be converted back to cash.

“One of the bank’s many fintech research projects, discussed earlier this week by a panel at the Payments Panaroma conference, is to build a proof of concept wholesale interbank payment system using a distributed ledger, in conjunction with Payments Canada, R3 and Canadian banks,” Bank of Canada Senior Deputy Governor Carolyn Wilkins said in a statement. “Experiments we are undertaking with DLT, such as this one, are confined to interbank payments systems.”

“The Bank’s goal in these projects is solely to better understand the technology first-hand. Other frameworks need to be investigated, and there are many hurdles that need to be cleared before such a system would ever be ready for prime time. None of our experiments are to develop central-bank issued e-money‎ for use by the general public.  These are still conceptual research questions that are being investigated by many central banks.”

Future

The experimentation by the Bank of Canada with Blockchain payment systems is a win for R3, a group established in 2015 and backed by over 40 banks worldwide, including most of Canada’s largest banks.

If the cross-bank payment platform gets up and running it will demonstrate the viability of Blockchain-based systems when it comes to the future of financial transfers; while we’ve seen some attempts at implementing intra-bank Blockchain transfer systems before, the scope of this project is far bigger again.

More details on the experiment, believed to be known as “Project Jasper” are expected to be released either Friday or next week.

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