Payment clearing and settlement systems
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Three things we learned about the Lynx payment system
Canada transitioned to a new wholesale payment system, Lynx, in August 2021. Lynx is based on a real-time settlement model that eliminates credit risk in the system. This model can require more liquidity; however, Lynx’s design allows Canada’s wholesale payments to settle efficiently. -
Anonymous Credentials: Secret-Free and Quantum-Safe
An anonymous credential mechanism is a set of protocols that allows users to obtain credentials from an organization and demonstrate ownership of these credentials without compromising users’ privacy. In this work, we construct the first secret-free and quantum-safe credential mechanism. -
Understanding DeFi Through the Lens of a Production-Network Model
We develop a production-network model to capture how decentralized finance (DeFi) has evolved across different sectors of financial services. The model allows us to measure the value added by different DeFi sectors and to study how the connections across the sectors influence token prices. -
Privacy-Preserving Post-Quantum Credentials for Digital Payments
Digital payments and decentralized systems enable the creation of new financial products and services for users. One core challenge in digital payments is the need to protect users from fraud and abuse while retaining privacy in individual transactions. We propose a pseudonymous credential scheme for use in payment systems to tackle this problem. -
Reviewing Canada’s Monetary Policy Implementation System: Does the Evolving Environment Support Maintaining a Floor System?
At the onset of the pandemic, the Bank of Canada transitioned its framework for monetary policy implementation from a corridor system to a floor system, which it has since decided to maintain. We provide a comprehensive analysis of both frameworks and assess their relative merits based on five key criteria that define a sound framework. -
How Banks Create Gridlock to Save Liquidity in Canada's Large Value Payment System
We show how participants in Canada’s new high-value payment system save liquidity by exploiting the new gridlock resolution arrangement. The findings have important implications for the design of these systems and shed light on financial institutions’ liquidity preference. -
From LVTS to Lynx: Quantitative Assessment of Payment System Transition
We quantitatively assess the changes in participants’ payment behaviour from modernizing Canada's high-value payments system to Lynx. Our analysis suggests that Lynx's liquidity-saving mechanism encourages liquidity pooling and early payments submission, resulting in improved efficiency for participants but with slightly increased payment delays. -
Simulating Intraday Transactions in the Canadian Retail Batch System
This paper proposes a unique approach to simulate intraday transactions in the Canadian retail payments batch system when such transactions are unobtainable. The simulation procedure has potential for helping with data-deficient problems where only high-level aggregate information is available. -
Improving the Efficiency of Payments Systems Using Quantum Computing
We develop an algorithm and run it on a hybrid quantum annealing solver to find an ordering of payments that reduces the amount of system liquidity necessary without substantially increasing payment delays.