Bank of England To Test Blockchain Features For New Payment System
UK central bank partners with payment solutions developers to test Blockchain features for the renewed gross payment system.
The Bank of England is undertaking a proof-of-concept (PoC) to understand how the renewed Real Time Gross Settlement (RTGS) service could be capable of interacting with Distributed Ledger Technology (DLT), according to the bank’s statement on March 27.
Real Time Gross Settlement systems are special payment systems where the transfer of funds is conducted between banks in “real time” and on a “gross basis”. This means that transactions are settled as soon as they are processed on a one-to-one basis without linking with any other transaction. RTGS systems are usually used for high-value transactions requiring instant clearing and operated by a country’s central bank.
In May 2017, the Bank of England issued the RTGS blueprint, claiming that the renewed service would provide “a diverse and flexible range of settlement models” to ensure payment infrastructures have access to central bank money. The bank then announced its intention to develop a payment service compatible with Blockchain technology, however in its recent announcement the bank rejected the idea of migrating to DLT entirely due to the technology’s immaturity:
“Although the Bank has concluded that Distributed Ledger Technology (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 UK bank will cooperate with companies such as Baton Systems, Clearmatics Technologies Ltd, R3, and Token, which develop payment solutions using innovative technologies. The project parties will examine the ability of DLT-based payment systems to interact with the renewed RTGS service and qualify ways in which the service’s “functionality could be expanded.” The bank is planning to report their findings later this year.
This week, the European Central Bank (ECB) together with the Bank of Japan (BoJ) released their study of Blockchain's potential for transforming securities settlements.