Bank of England to Open New Payment System to Blockchain Users
To be able to collaborate with fintech firms using distributed ledger technology (DLT), officials have now confirmed that The Bank of England is under the process of doing a complete overhaul of its interbank payment system. This is not only a major boost to the development of blockchain in Britain but also opens the network to firms that undertake transactions across a blockchain network. A revamp of the system means that it increases the number of businesses that can use it and strengthens defenses against cyber-attacks. The Bank of England has set its sights on getting everything ready and redoing this system that underpins British trading and banking in the City of London within the next two years, that is, by the end of 2020.
The bank's current RTGS (Real Time Gross Settlement) system handles transactions worth around 500 billion pounds and facilitates settlements between financial institutions. Not surprisingly, this is actually equivalent to almost a third of Britain's annual economic output or a quarter of the country's estimated GDP (gross domestic product.) Recently, the British central bank published a report that evaluated its PoC (Proof of Concept) with a lot of firms that currently operate in the DLT (distributed ledger technology) space. This test was done with the intention of examining the feasibility of linking together the bank's updated version of RTGS (Real Time Gross Settlement) service with firms that use blockchain tech, the technology used to record transactions in cryptocurrencies like bitcoin. It also showed what kind of changes would be required to the proposed revamp of the Real Time Gross Settlement in such a way that it could support settlement with blockchain firms.
Mark Carney, the Governor of Bank of England reportedly said that, "No longer will access to central bank money be the exclusive preserve of banks."
Mark Carney, the Governor of Bank of England reportedly said about a month ago that an important feature of the bank's very ambitious rebuild of the RTGS system was so they could open it to private payment systems, perhaps even to DLT firms. Despite him being a noted cryptocurrency sceptic, it seems that he has accepted the idea. He said that "No longer will access to central bank money be the exclusive preserve of banks".This is great news for Britain, as the government of Britain is very interested in making sure that the United Kingdom remains a leading center for fintech innovation like blockchain and payments.
Featured participation from DLT startups like Token, R3, Clearmatics Technologies and Baton Systems.
There's more to say about the Proof of Concept (PoC) that was tested in March this year. It featured participation from DLT startups like Token, R3, Clearmatics Technologies and Baton Systems. If the newly published report on the trial can be believed, it says that all of the above participants expressed utmost confidence that they could connect to the Real Time Gross Settlement system to settle transactions denominated in central bank currency. The Bank of England released a statement in this regard saying that "All participants confirmed that the functionality offered by the renewed RTGS service would enable their systems to connect and to achieve a settlement in central bank money". And that's not all. It also said that the experts will be investigating "whether the renewed RTGS service could provide and consume acceptable forms of cryptographic proofs."
The Bank of England released a statement in this regard saying that "All participants confirmed that the functionality offered by the renewed RTGS service would enable their systems to connect and to achieve a settlement in central bank money."
It can be recalled that only last year, a blockchain startup called Ripple, based in San Francisco, teamed up with the Bank of England to trial an interledger system that was designed to synchronize payments between central banks. However, at that time, the experts and officials involved found that blockchain technology was "not sufficiently mature" for DLT firms to be supported on the RTGS. It is probably the United Kingdom's expected departure from the European Union that has motivated the country and its institutions to set an increased emphasis on attracting fintech firms to the country. BoE hopes to have the new RTGS system online by 2020.