The Bank of Canada has announced its successful testing of the feasibility of clearing and settling securities using blockchain technology in a 36-page report.
The report follows a collaborative research effort between the Bank of Canada, Payments Canada, and TMX Group — who operates the Toronto Stock Exchange — known as Project Jasper. The testing of securities and payment settlement using a proof-of-concept (PoC) private blockchain framework was part of the third phase of the Jasper research initiative.
Project Jasper was launched in March 2016 and has received significant attention for its comprehensive approach to testing blockchain technology as an underlying settlement layer for legacy financial systems. The initial 70-page whitepaper outlines the goals and details of the research initiative.
The first two phases of the project focused on the settlement and clearing of high-value interbank payments as a primer for the third phase. Phase 3 of Jasper consisted of a PoC permissioned blockchain designed to be integrated with existing market infrastructure by using a cash-on-the-ledger central bank model where digital repository receipts were issued by the Bank of Canada and Canadian Depository for Securities.
The delivery versus settlement model helps to reduce counterparty risk and leads to increased finality speed of securities settlement. The new comprehensive report follows the initial publishing of the findings back in May at the Payments Canada Summit. Accenture and R3 also helped publish the report which included some major takeaways:
- Blockchains can be used for securities settlement and clearing while concurrently meeting the privacy and scalability requirements of the Canadian financial system.
- The results demonstrate the need for more exploration into the cost and efficiency gains of blockchains for settlement of other types of assets.
- The Bank of Canada and Canadian Depository for Securities were able to maintain full control over the necessary instruments that were part of the process.
The ability of blockchains for clearing and settlement of securities has fueled interest in further researching their impact on building an integrated financial system, which will be the next steps of the Jasper Project.
The viability of blockchains for securities settlement as outlined by the Jasper Project comes at a time where institutional developments are ramping up in the blockchain and cryptocurrency realm. Bakkt — the U.S. institutional Bitcoin futures and custody platform — revealed its official launch date as December 12, 2018, pending regulatory approval. Binance — the leading crypto-crypto exchange — just received funding from Singapore’s Sovereign Fund — Vertex Ventures — signaling a huge step in transitioning Binance to a fiat-crypto on-ramp in the bustling city-state.
The new SEC commissioner also just met with several ETF proposal representatives about the current state of Bitcoin ETFs and concerns that the SEC has with the concept. This follows the recent review and additional request for comments by the SEC on rejected Bitcoin ETF proposals by VanEck and SolidX, among others, earlier this month.
Accenture additionally announced its new blockchain interoperability tool, connecting R3’s Corda platform, Hyperledger Fabric, and JP Morgan’s Quorum as an initiative to further integrate siloed assets into one interoperable ecosystem.
The connection between legacy financial systems and blockchain technology is gaining momentum. While there are still explicit regulatory frameworks that need to be ironed out along with some interoperability advances in the underlying technology, institutional integration with blockchains is on the horizon.