Bank of Canada studies payments system using tech behind bitcoin

By Ethan Lou and Leah Schnurr
TORONTO/OTTAWA, June 16 (Reuters) - The Bank of Canada is
experimenting with a payments system based on the technology
behind the bitcoin virtual currency, the central bank said on
Thursday.
Bank of Canada Senior Deputy Governor Carolyn Wilkins said
the central bank has been working with commercial banks to build
the experimental interbank payment system.
The goal "is solely to better understand the technology
first-hand," she said in a statement. "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."
Wilkins, expected to speak further on the issue on Friday,
said the experiment is among many financial technology research
projects. Such experiments, she noted, are not aimed at
developing central-bank issued e-money for use by the general
public.
Details of the project, which uses the distributed-ledger
technology associated with web-based currency bitcoin, were
revealed at a payment-technology event in Calgary on Wednesday
that was closed to media.
Kyle Kemper, an entrepreneur and head of the Bitcoin
Alliance of Canada, who was present at Wednesday's event, said
the experiment is called "Project Jasper" and involves
blockchain technology.
Blockchain's distributed-ledger system allows users to
conduct secure transactions with each other without the need for
middlemen or central oversight, unlike traditional electronic
funds transfers.
A slide from a presentation at the event seen by Reuters
details how the banks in the experiment would pledge cash
collateral in a pool that the Bank of Canada would convert into
a digital version.
The digital currency would then be used as a medium of
exchange and could be converted back to cash.
While long known as the backbone of bitcoin, launched under
a pseudonym, blockchain has garnered the attention of large
financial institutions in recent years.
R3, a New York-based research consortium that includes all
of Canada's major banks, is a partner in the Bank of Canada's
project, along with Payments Canada.
Royal Bank of Canada RY.TO , CIBC CM.TO , TD Bank TD.TO
and Payments Canada declined to comment.