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Payments Canada selected Mastercard's Vocalink as the clearing and settlement solution provider for the country's new Real-Time Rail (RTR). Operated by Payments Canada and regulated by the Bank of Canada, the RTR will allow Canadians to initiate payments and receive irrevocable funds in seconds, 24/7/365. Underpinned by the ISO 20022 data standard, the system will support payment information travelling with every payment and act as a platform for innovation, enabling the introduction of new and enhanced payment products and experiences. The RTR is expected to launch in 2022.

Wealthsimple has become the first non-bank or credit union to be approved by the Bank of Canada for a direct settlement account. This means that the FinTech startup will not have to rely on a third-party financial institution to process transactions when Real-Time Rail (RTR) launches in Canada, as it will have direct access. However, for the second time, Payments Canada has delayed the RTR launch, saying it needs more time to validate and test the system's components and end-to-end integration, and it could be a long wait.

Payments Canada will conduct a second review of its proposed Real-Time Rail (RTR) payments system, delaying delivery further. A third party delivery assurance review, focused on program management, people and processes, has recommended additional testing and investments to ensure ongoing operations once the RTR system goes live. Payments Canada is to undertake a new three-month investigation into the risks identified.

The Bank of Canada (BoC) launched an online public consultation on the features that could be included in a digital Canadian dollar. The BoC is also seeking opinions about how people would likely use a digital dollar, what security features are important, and what concerns they have about accessibility and privacy. The BoC says that, at this time, a digital dollar is not needed, but Canada may need one in the future, so BoC wants to be ready.

The Bank of Canada published a paper that provides an analysis of cash trends in Canada before and during the COVID-19 pandemic. It finds that cash demand has been strong pre-pandemic and increased sharply during the pandemic. While cash use fell initially due to the decreased number of in-person shopping opportunities, it recovered as containment measures eased. The paper concludes that the long-term trend away from cash use as a method of payment could lead to a decline of merchant acceptance over time and erode the broader demand for cash more generally, which could warrant the Bank of Canada issuing a digital dollar.

"Canada has a strong, globally competitive financial sector that has proven to be stable, resilient and well respected. However, compared to other developed countries, Canada has experienced delays in rolling out frameworks, including legislation, that enable the fintech ecosystem to evolve in a way that is reliable and safe for end users, while still allowing them to leverage the power of technology. Fortunately, several key government and regulatory efforts are now gaining momentum and will enable Canadians and fintechs to benefit from the following trends:"

The Bank of Canada published an update on crypto-asset ownership in Canada using data from two surveys conducted in 2022. It found that Bitcoin ownership declined from 13% in 2021 to 10% in 2022, and ownership of other crypto-assets also fell. These drops occurred against a background of steep price declines and an increasingly tight regulatory atmosphere for crypto-assets.

"Currently, there is no overarching regulatory framework for stablecoins in Canada, and no authority has asserted jurisdiction over the operations of their issuers. This article is the first scholarly work to provide a detailed assessment of the jurisdictional perimeter, and risk-informed regulatory design principles, for fiat-backed stablecoins in Canada. It provides two unique and vital contributions to policy formation in stablecoin regulation. First, it analyzes whether stablecoins are securities, investment funds, or derivatives based on statutory definitions and interpretive jurisprudence. Second, it assesses whether a securities-based regulatory framework is sufficient to mitigate the risks that stablecoins pose, or if it leaves gaps that must be filled by banking, payments, and systemic risk regulators. While securities authorities have a reasonable case for legal jurisdiction over stablecoins based on how they are currently used, there are several "gaps" if stablecoins are exclusively regulated under securities law, and while many protections are provided, the full breadth of risks will not be mitigated. If Canadian securities regulators move forward with a stablecoin policy framework, they must do so with an eye to resulting gaps. Ultimately, a comprehensive framework will require inter-agency cooperation, across the financial regulatory landscape, to adequately address all stablecoin risks. It must apply "same risk, same regulation" principles, contextualized to support innovation, financial inclusion, and competition, using tiered parameters, and parallel and complementary inter-agency oversight. It must seek international regulatory cooperation, data-sharing, and contemplate contagion, interconnection, and the consequences of the potential failure of a global stablecoin issuer."

"Lynx is a critical system for transferring high-value payments quickly and safely between financial institutions in Canada. Since its launch, Lynx appears to achieve a good trade-off between credit risk, settlement speed and liquidity efficiency. Traditionally, a common concern with an RTGS system is that it requires more liquidity, though it does settle payments in real time and remove credit risk between participants. Results show that Lynx makes efficient use of liquidity while quickly processing payments in the queue. This sound system design and the strong collaboration between Payments Canada, financial institutions and authorities have helped make the transition from the LVTS to Lynx a success."

To better understand trends in payment methods accepted by Canadian businesses, including cash acceptance and the impact of innovations such as mobile payments, the Bank of Canada conducts the Merchant Acceptance Survey, a survey of small and medium-sized businesses. It finds that 96% of these businesses in Canada accepted cash in 2023. Acceptance of debit and credit cards has increased since 2021 to 89%, and acceptance of digital payments has increased as well. However, the vast majority of merchants (92%) have no plans to go cashless in the future.

The Regulators have noted that there are no Platforms recognized as exchanges (and therefore regulated as such) in Canada. The consultation with stakeholders aims to benefit the trading public (by way of regulation and improved security over their crypto-assets), and the Platforms themselves, which have indicated such regulation would assist with consumer confidence as the Platforms seek to expand their operations.

"Canadians are well-served by the existing payment ecosystem, so we believe there is no need for the Bank of Canada to issue its own digital currency at this time. But the world can change very quickly, so we need to get ready in case one is needed... The Bank of Canada can imagine scenarios in which we would consider issuing a CBDC so we can continue to provide Canadians with trustworthy methods of payment."

"As anticipated in our 2019 year in review, there were significant and notable developments in the Canadian Fintech industry in 2020. These occurred in the context of the COVID-19 pandemic, which accelerated the growth of some segments of the Fintech industry (notably for example, point-of-sale ("buy now, pay later") lenders, businesses facilitating digital onboarding/ ecommerce and/or cashless transactions), while presenting challenges for others (such as small business lenders and travel focused lenders). In contrast to the approach taken in some other countries (in particular, the United States), Fintech entities in Canada did not participate in deploying pandemic government relief to businesses in Canada."

"An anonymous token-based central bank digital currency (CBDC) would pose particular security risks," the Bank of Canada wrote in its Oct. 5 report. "These risks arise from how balances are aggregated and stored, how CBDC is used for transactions, and how various solutions such as e-wallets, crypto exchanges and banks compete to attract users."

"According to David Andolfatto a Canadian retail CBDC is, in principle, an attractive proposition. But given the system currently in place and the prospects for its near-term evolution, a retail CBDC on its own is, in my opinion, not an essential initiative at this point in time. For consumers, a retail CBDC would mostly replicate what they already have available. As such, the initiative is not likely to attract business away from private-sector PSPs or serve to discipline private-sector pricing protocols and rewards programs. For a CBDC to be successful in this regard, legislation (or moral suasion) designed to alter private-sector marketing behaviour is likely required. But if such legislation were forthcoming, the rationale for a retail CBDC is even further diminished. On the other hand, a wholesale CBDC (together with legislation governing pricing protocols) seems like the most straightforward way to promote competition and fairness in the Canadian payments system. While I see no reason why a CBDC could not work in principle, I also do not see why it is essential in practice. It probably makes more sense to let the Bank of Canada focus on its core competencies - monetary policy, regulation and wholesale payments - and let a regulated private sector manage retail payments."

I spoke at a workshop hosted by the Centre for International Governance Innovation (CIGI) and Bennett Jones on the need for, and design of, a digital Canadian central bank digital currency (CBDC) or "digital loonie". It focused on three areas: what can Canada learn from CBDC first movers (that was the session I participated in), what are the early steps necessary to prepare and design a digital loonie, and what will be required legally for a CBDC and what are the legal pillars on which that system could be based. It was run under Chatham House Rule but a summary report will be published within the next few months.

Multiverse Computing has reportedly completed a proof-of-concept project with the Bank of Canada through which the parties used quantum computing to simulate the adoption of cryptocurrency as a method of payment by non-financial firms. Most scenarios in the model showed that non-financial institution adoption of the cryptocurrency would be slow, since there was some upfront knowledge and cost associated with converting fiat to a digital asset. It was also able to simulate how banks might respond, by reducing wire transfer fees to compete with the very low cost of crypto transactions.

"Canada could be throwing its weight behind the blockchain industry in the coming months, concluded a report from the House of Commons highlighting the technology's benefits. The 62-page report stemmed from the Standing Committee on Industry and Technology, urging the government to recognize blockchain "as an emerging industry." The report noted that blockchain could play a significant role in reforming the financial services sector while finding applications in the supply chain and manufacturing industries."

"Democratic concerns must be a part of the discussion about a national digital currency. Similar worries about privacy, surveillance and national digital currency were also raised in the European Union, the United States and elsewhere. Launching the digital Canadian dollar is a political decision, not a technological one. Ensuring freedom is the same. For the digital Canadian dollar and the Bank of Canada to be trusted, these worries must be addressed and mitigated. If the decision to issue this digital money is made, it needs to be done in a responsible manner"

"Under the Retail Payment Activities Act (RPAA), the Bank will be responsible for supervising payment service providers (PSPs). The aim is to build confidence in the safety and reliability of their services while protecting end users from specific risks. The Department of Finance Canada is leading the development of regulations for the supervisory framework with support from the Bank. Proposed regulations to help clarify details of the RPAA have been published in Part I of the Canada Gazette."