BoC backing open banking and DeFi

Canada is building a system that lets you tell your bank, “send my transaction data to this app,” without handing over your password. Ottawa’s Budget 2025 says the first rollout will cover consumer and small-business bank accounts, start with data sharing, and add payment initiation by mid-2027. (canada.ca) The immediate target is a problem Canada already has: about nine million Canadians share financial data today through “screen scraping,” which means giving login credentials to another company so it can pull account data. The government says the new framework is meant to replace that with application programming interfaces, which are controlled digital pipes banks can open without exposing your password. (canada.ca) The government is calling this “consumer-driven banking,” not full “open finance,” and that wording matters. The Budget 2025 framework says the initial scope is chequing accounts, savings accounts, investment products available through online portals, and lending products, while insurance is not included in the first phase. (canada.ca) That means the first version may help a budgeting app see your bank balance, but not necessarily your whole financial life in one place. The Financial Consumer Agency of Canada said years ago that payments initiation and wider “open data” could be an end-state goal, but recommended a measured first phase instead of trying to wire everything together at once. (canada.ca) The Bank of Canada sits in this story because payments are one of the pieces moving from “view my account” to “act on my account.” The central bank already supervises payment service providers under the Retail Payment Activities Act, which took effect in 2024 and gives the bank a direct role in registration, risk management, and enforcement for non-bank payment firms. (bankofcanada.ca) At the same time, Bank of Canada researchers just published a paper on decentralized finance lending, which is lending done by software on a blockchain instead of by a loan officer at a bank branch. Their April 2026 paper studied Aave Version 3, described as the largest decentralized lending protocol by total value locked, using transaction-level data. (bankofcanada.ca) The paper’s headline finding is unusually direct for a central-bank study: decentralized lending is “operationally viable” if governance is strong. The same paper says the weak points are capital efficiency, liquidation risk, and fragility inside the crypto system, not an inability to run the basic lending machine. (bankofcanada.ca) In plain English, decentralized finance already does some bank-like jobs with code. Users post crypto collateral, borrow against it, and get liquidated automatically if the collateral value falls too far, which removes the human discretion banks use when a borrower gets into trouble. (bankofcanada.ca) That automation solves one problem and creates another. The Bank of Canada paper found many users stack leverage on top of leverage even though these loans are overcollateralized, and it found liquidations come in concentrated waves when prices drop fast. (bankofcanada.ca) The bridge between the two stories is that Canada is getting more comfortable with finance delivered by software, but only inside tighter rails. In open banking, the rail is accredited data-sharing and regulated payment initiation; in decentralized finance, the rail is better governance, because the Bank of Canada’s own researchers say the code works better than the control systems around it. (canada.ca) (bankofcanada.ca)