At its essence, blockchain is simply a universal banking protocol. So it wasn’t much of a surprise when it was revealed this past June that the Bank of Canada (BoC) isinvestigating a digital version of the Canadian dollar based on blockchain.

Dubbed CAD-coin, the digital fiat currency initiative is a component of the bank’s Project Jasper to explore the merits of the blockchain technology. According to a June 2016 article, sources close to the ex- periment emphasized that the BoC and the Canadian Payments Association currently do not have plans to issue a digital fiat currency in the near future.

According to David Jevans, chairman of the APWG (Anti-Phishing Working Group), expect more financial firms to explore one of the nearly 400 blockchain types, including Bitcoin and Ethereum. But there are clear security issues that should be looked at as well — to say that security around these blockchain initiatives are not probably understood would be an understatement, he told CSO Digital.

“It is appropriate for every financial institution to be investigating blockchain technologies. If implemented correctly, they can dramatically reduce settlement times and allow non-IPO type of instruments to be traded much more securely,” said Jevans.

Organizations will have to ensure they learn from the early issues around bitcoin, which ended up in an arms race of sorts, said Jevans.

The challenge, he noted, is every node in the system needs to have the same level of security as the Swift payment system: “If anyone can rewrite one or more of these

nodes, they can compromise the ledger and move money around wherever they want. And we know that Swift has been breached several times.”

Ultimately, it’s about creating a more open platform for verifying transactions and auditable contracts; this widespread and transparent verification as enabled by the effective use of blockchain could be a godsend for those type of systems, he added.

But it’s going to take some time as organizations kick the proverbial tires to ensure the proper security con- trols are in place — don’t expect a digitized Canadian or U.S. dollar anytime soon, he added.

That said, it might come much more quickly than we think, he added.

Carolyn Wilkins, the BoC’s senior deputy governor had this to say regarding the issue in a statement: “One of the bank’s many fintech research projects…is to build a proof of concept wholesale interbank payment system using a distributed ledger, in conjunction with Payments Canada, R3 and Canadian banks. Experiments we are undertaking with DLT, such as this one, are confined to interbank payments systems. The Bank’s goal in these projects is solely to better understand the technology first-hand. Other frameworks need to be investigated, and there are many hurdles that need to be cleared before such a system would be ever be ready for prime time. None of our experiments are to develop central-bank issued e-money for use by the general public. These are still conceptual research questions that are being investigated by many central banks.”