BIS and Bank of Canada Launch Toronto Innovation Centre to Foster Financial Innovation

The Bank for International Settlements (BIS), in collaboration with the Bank of Canada, has inaugurated the BIS Toronto Innovation Centre. This center, the first in the Americas and the seventh globally, aims to advance financial innovation and inclusivity not only in Canada but also across Latin America and the Caribbean.

The launch of the Toronto Innovation Centre marks a significant milestone in the BIS’s mission to build the future financial system through innovation and experimentation. Agustín Carstens, General Manager of the BIS, emphasized the importance of this development in fostering a more modern, efficient, and inclusive financial system. The center’s establishment is a testament to the BIS’s commitment to promoting technological advancements that can enhance the functionality of the global financial system.

The Toronto Innovation Centre will concentrate on three of the BIS’s six priority themes:

1. Next-Generation Financial Market Infrastructures: This includes exploring cutting-edge technologies that can improve the efficiency and reliability of financial market infrastructures.
2. Regulatory, Supervisory, and Oversight Innovations (Suptech): The center will focus on developing technologies that aid regulatory bodies in monitoring and overseeing financial markets more effectively.
3. Open Finance: This theme involves creating more inclusive financial systems by leveraging open banking principles and technologies to provide greater access to financial services.

The other three BIS priority themes, which are covered by other Innovation Hubs, include central bank digital currencies (CBDCs), green finance, and cybersecurity.

The inaugural project of the Toronto Innovation Centre, the Fully Scalable Settlement Engine (FuSSE), is a collaborative effort with the Inter-American Development Bank (IDB). This project aims to develop next-generation payment systems and financial market infrastructures that can position countries, even those with basic payment infrastructures, at the forefront of financial technology. FuSSE will play a crucial role in enhancing the efficiency and scalability of settlement systems, making financial transactions more seamless and secure.

Tiff Macklem, the Governor of the Bank of Canada, outlined three key motivations behind the establishment of the Toronto Innovation Centre:

1. Harnessing Digital Transformation: Digital technology has already significantly transformed finance, but this is just the beginning. By fostering innovation, the central bank aims to harness the benefits of digital transformation while mitigating potential pitfalls.
2. Creating Public Goods: While the private sector excels at innovation, certain aspects of finance are public goods that require the central bank’s involvement. The Bank of Canada aims to play a pivotal role in developing these public goods to ensure they serve the broader public interest.
3. Mitigating Risks: Innovation and new technologies bring significant risks, including cyber attacks, privacy breaches, and fraud. As institutions that rely on trust, central banks must guard against these dangers to maintain the integrity of the financial system.

The Toronto Innovation Centre is part of a broader BIS strategy to foster international collaboration in financial innovation. Other BIS Innovation Hubs are located in Switzerland, the Eurozone, the United Kingdom, the Nordic countries, Hong Kong, and Singapore. Each hub focuses on different priority areas, contributing to a comprehensive global effort to advance financial technology.