Page 23 - FIGI: Security Aspects of Distributed Ledger Technologies

the idea, resulting in the remaining banks providing EUROPE/JAPAN: Project Stella is a joint DLT Proj-
CBRs to RMI banks threatening to withdraw CBRs. ect of the ECB and the Bank of Japan - conducted
While KYC requirements have yet to be finalized, in-depth experiments to determine whether certain
implementation of the SOV is anticipated to require functionalities of their respective payment systems
identity registration which precludes anonymous could run on DLT.
and pseudo-anonymous use which are characteris-
tics of other crypto-currencies. 117 General Findings:
The use of CBDC though in the context of de-risk- • DLT-enabled solution could meet the performance
needs of current large value payment systems.
ing is to provide some means of traceability of trans- • The project also confirmed the well-known trade-off
actions and money flows beyond currently available, between network size and node distance on one side
while linking the use to identifications of users. As and performance on the other side. 123
an exemplar of this ideal, in 2017, Caribbean-based
fintech company Bitt announced it was undertaking Security-related Findings:
a pilot with to launch the Barbadian Digital Dollar – a • Transactions were rejected whenever the certificate
CBDC on the Bitcoin blockchain – in an effort to authority was not available, which could possibly
118
119
constitute a single point of failure. That is, processing
improve financial inclusion in the region and to sty- restarted without any other system intervention once
120
mie derisking of the local banking sector. the certificate authority became available again.
121
• In terms of resilience and reliability, it showed a DLT’s
6�4 Use of DLTs for Clearing and Settlement Sys- potential to withstand issues such as (i) validating
node failures and (ii) incorrect data formats. As for the
tems 122 node failures, the test results confirmed that a validat-
A number of central banks are testing DLTs in settle- ing node could recover in a relatively short period of
ment domains. In most cases, DLTs are not consid- time irrespective of downtime.
ered sufficiently mature or resilient enough to be SOUTH AFRICA: Project Khokha of the South Afri-
used in a live environment. can Reserve Bank built a proof-of-concept whole-
CANADA: Project Jasper is a collaborative research sale payment system for interbank settlement using
initiative by Payments Canada, the Bank of Cana- a tokenised South African Rand on a DLT platform,
da, R3 and a number of Canadian financial institu- and using the Istanbul Byzantine Fault Tolerance
tions. The project aims to understand how DLT could consensus mechanism and Pedersen commitments
transform the future of payments in Canada through for confidentiality. DLT nodes were operated under a
the exploration and comparison of two distinct DLT variety of deployment models (on-premise, on-prem-
platforms, while also building some of the key func- ise virtual machine, and cloud) and across distributed
tionalities of the existing wholesale interbank settle- sites while processing the current South African real-
ment system. time gross settlement system’s high-value payments
transaction volumes within a two-hour window.
General Findings:
• Use of Ethereum did not deliver the necessary settle- General Findings:
ment finality and low operational risk required of core • Demonstrated an ability of the DLT system to process
settlement systems. Use of R2’s Corda system using transactions within two seconds across a geograph-
‘notary node’s for consensus delivered improvements ically distributed network of nodes using a range of
in settlement finality scalability and privacy cloud and internal implementations of the technology.

Security-related Findings: Security-related Findings:
• The DLTs used did adequately address operational risk • DLT used were not viable for some use cases unless
requirements. adequate levels of privacy are achieved. Furthermore,
• Further technological enhancements are required to the team concluded that, currently, such levels are not
satisfy the PFMIs required for any wholesale interbank fully supported for the four explored deployment mod-
payments settlement system. els with true decentralization. That is, without relying
on a trusted node or party.

Security Aspects of Distributed Ledger Technologies 21