Bank of Canada testing digital currency bitcoin

In what can be called the first known test by a major central bank for alternate currency, the Bank of Canada is studying the technology underlying the digital currency bitcoin.

The bank is studying the currency for interbank payments. But senior deputy Governor Carolyn Wilkins stressed that the country has no plans to issue a digitized Canadian dollar or conduct tests dealing with public money.

The Bank of Canada, in partnership with New York-based startup R3 CEV, is undertaking the experiment using blockchain technology, which is a so-called distributed ledger system that is billed as being more open, transparent and flexible than existing databases widely used in banking.

Others involved in the project included Payments Canada, which owns and operates the country’s payment clearing and settlement infrastructure, and Canadian commercial banks.

“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 said. She added that many central banks are investigating similar questions.