The Bank of Canada joined the Bank for International Settlements' Project Agora, an international test of how tokenization could improve wholesale cross-border payments.
Project Agora is not a retail payment app for consumers. It is a financial-infrastructure experiment focused on wholesale transactions among central banks, commercial banks, payment service providers, and clearing houses.
The Bank said the project had already tested the feasibility of a multi-currency unified ledger that enables atomic settlement of cross-border wholesale transactions.
The prototype combines tokenized commercial bank deposits and wholesale central bank money on a programmable platform. The stated aim is to improve the speed, efficiency, transparency, and accessibility of international payments.
The next stage will continue testing the prototype and examine how an Agora-type platform could work within existing legal and regulatory frameworks.
Those legal questions include settlement finality and rules designed to counter money laundering and terrorism financing, placing the test within the financial-infrastructure and compliance systems used for cross-border transactions.
The global project involves seven other central banks, including the Federal Reserve Bank of New York, the Bank of England, the Bank of France representing the Eurosystem, the Bank of Japan, the Bank of Mexico, the Swiss National Bank, and the Bank of Korea.
More than 40 financial institutions are involved, including systemically important banks, payment service providers, and clearing houses.
The tax link is indirect. A faster and more transparent wholesale payment system can affect financial-sector compliance, settlement risk, international business costs, and the systems governments use to monitor illicit finance.