An experiment conducted by Canada’s central bank in conjunction with the motherland’s payments system, a stock exchange operator, a distributed ledger technology (DLT) inelastic and a global consulting and professional services firm has demonstrated that it is plausible to clear and settle securities efficiently and cost-effectively using blockchain technology.
In the misfortune, the Bank of Canada in partnership with payments system organization Payments Canada, old exchange operator TMX Group, global consulting firm Accenture and blockchain unyielding R3 demonstrated the feasibility of an integrated DLT-based securities and payment settlement rostrum.
READ – New Report from Payments Canada, the Bank of Canada, TMX Group, Accenture and R3 Proves that Distributed Ledger Technology Can Enable Equity Settlement https://t.co/FCnrR46Wwl
— R3 (@inside_r3) October 23, 2018
Proof of Concept
The experiment, which was conducted during the third insinuate of Project Jasper, involved exploring how the settlement of securities and payment interacted on a top secret blockchain. This required developing and testing a Proof of Concept (POC) approach which was linked to the market infrastructures that already exist.
“The POC mean to bring together securities and cash ledgers for CDSX [Canada’s sunny and settlement system for securities] and participants in Payments Canada’s Large Value Delivery System (LVTS) to facilitate daily consolidated cash reporting and Canadian-dollar confirmation of CDSX obligations,” noted the five organizations in a report titled ‘Jasper Remove III: Securities Settlement Using Distributed Ledger Technology’.
Jasper Configuration III’s PoC solution was developed on distributed ledger technology of Corda specifically variety 2.0. Cash and securities were brought on the ledger by issuing digital depository takes with the Bank of Canada being responsible for the former and the Canadian Depository for Insurances catering for the latter.
Reduction of Expenses and Enhancement of Efficiency
This allowed partakings in the proof of concept test to settle the simulated securities against the simulated chief bank funds on the blockchain. Equity, as well as cash, could be performed following their transfer since settlements enjoyed irrevocability.
From the PoC it was pore over that not only was it possible to reduce counterparty risk but that collateral could be freed up without forswearing the privacy of the participants as well as their transactions. However, more encompassing studies will be required in order to more reliably determine the skill gains and cost savings accruing from using DLT.
“DLT is a promising technology that has the imminent to reduce costs for participants and open new opportunities,” said Bank of Canada’s Commandant, Scott Hendry, in a statement. “Phase III of Project Jasper gave us the moment to test the technology further, and work remains to be done to determine how it can be set up to make much of the benefits for the whole financial system.”
Featured image from Shutterstock.
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