In April 2022, the Bank of Canada announced that it would continue to use a floor system to implement monetary policy by providing a sufficiently large quantity of settlement balances to enable the overnight repo rate to trade at close to the deposit rate. In contrast, the Bank's guiding...

Modernizing Canada's wholesale payments system to Lynx from the Large Value Transfer System (LVTS) brings two key changes: (1) the settlement model shifts from a hybrid system that combined components of both real-time gross settlement (RTGS) and deferred net settlement (DNS) to an RTGS system;...

We use a simple model to study whether private payment systems based on bank deposits can provide the optimal level of safety. In the model, bank deposits backed by projects are subject to default risk that can be mitigated by a depositor's ex ante and ex post monitoring. Safe payment...

Canada is in the midst of developing three new core payment systems: Lynx, Settlement Optimization Engine (SOE) and Real-Time Rail (RTR). Lynx and SOE will replace the current Large Value Transfer System (LVTS) and Automated Clearing Settlement System (ACSS), whereas RTR will be a new...

We investigate the risks and opportunities to the mandates of central banks arising from fintech developments. Fintech may affect the different areas of responsibility of central banks - mainly monetary policy and financial stability - by changing money demand and by changing the industrial...

This paper explores the relationship between innovations in payment systems and financial intermediation. By focusing on excess reserves and the currency demand, we provide evidence on the extant transmission mechanism. In this direction, we applied the generalized method of moments (GMM) and...

Using detailed data from Canada's new high-value payment system (HVPS), we show how participants of the system save liquidity by exploiting the new gridlock resolution arrangement. These observed behaviors are consistent with the equilibrium of a "gridlock game" that captures the key incentives...

Blockchain is one of the most disruptive innovations in the field of technology in 21st century. Blockchain, a distributed ledger technology (DLT) and smart contracts, has emerged as a ground-breaking application in the financial sector. The three key properties of Blockchain technology,...

Over millennia, mankind has used hard cash in various forms ranging from shells to gold coins and paper. More recently, cash has become unpopular in political circles, as it effectively restricts states’ power to tax (explicitly or via negative interest rates) or to survey and potentially...