The Bank of England’s updated payments system will let blockchain-based firms connect and make settlements in central bank money, the BoE said on Monday based on the results of a proof of concept (PoC) trial.
In a bid to renew its Real-Time Gross Settlement (RTGS) service, the UK central bank undertook a PoC on March 27 to test how the system could support settlements with blockchain companies. Participants included R3, Baton Systems, Clearmatics Technologies and Token, with the former three using Distributed Ledger Technology (DLT) in their operations. In contrast, Token runs a centralized, rather than a decentralized, ledger, but they should nevertheless be able to use the functionality of a modernized RTGS service, BoE wrote.
The firms indicated that the UK central bank should continue engaging with fintech enterprises in order for the current sterling settlement system to be up to date with the latest innovations in payment technology. In addition, some of the participants recommended that BoE adopt a more flexible account structure and that it provide acceptable forms of cryptographic proofs.
“Although the [b]ank has concluded that [DLT] is not yet sufficiently mature to provide the core for the next generation of RTGS, it places a high priority on ensuring that the new service is capable of interfacing with DLT as and when it is developed in the wider sterling markets,” the BoE noted in the announcement of the PoC in March.
The BoE’s interest in adapting its settlement service for DLT should not come as a surprise, considering governor Mark Carney’s speech at the International FinTech Conference held in April 2017. He said securities settlement appears to be “particularly ripe for innovation” and claimed DLT could significantly improve the accuracy, efficiency and security of settlement, wholesale payments and clearing.
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