Project Jasper: Blockchain Cannot Yet Replace Current Intrabank Settlement Systems

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The Canadian central bank and its Project Jasper partners revealed the results of their experiment with distributed ledger technology (DLT) in a press release published on Thursday and a report posted on the central bank’s website. The project's conclusions suggest that the technology still has obstacles to overcome before it can reliably replace the existing national intrabank payment settlement system.

Project Jasper was the result of a partnership between the Bank of Canada, Payments Canada, and several major Canadian banks. The central bank last year asserted that the project’s only goal was to gain a better understanding of the technology through “first-hand” experience, with the intent of identifying the challenges that would need to be met before a wholesale blockchain intrabank settlement system could be “ready for prime time.”

The results of those trials could best be described as mixed, with the project participants identifying several areas where DLT could potentially be of benefit, as well as several critical weaknesses that render the technology unsuitable for serving as a wholesale intrabank settlement system at this time. The project was successful in using the technology for settlements, and even managed to yield new innovations in areas such as liquidity savings. However, as Bank of Canada Senior Deputy Governor Carolyn Wilkins noted,

"The bottom line is that a stand-alone DLT wholesale system is unlikely to match the efficiency and net benefits of a centralized system. At its heart, there exists a fundamental inconsistency between a centralized wholesale interbank payment system and the decentralization inherent in DLT."

The report ultimately concluded that the technology was not mature enough at this point to completely replace the existing settlement systems, since “some parts of a viable wholesale payment system are inherently centralized.” The report continued by observing:

“Instead, the benefits of a DLT-based wholesale payment system likely lie in its interaction with the broader FMI ecosystem. Such benefits may be obtained by integrating other assets on the same ledger as payments— which could greatly simplify collateral pledging and asset sales—reaping economies of scope and reducing costs to participants by integrating backoffice systems.”

Author: Ken Chase

Freelance writer whose interests include topics ranging from technology and finance to politics, fitness, and all things canine. Aspiring polymath, semi-professional skeptic, and passionate advocate for the judicious use of the Oxford comma.

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