Blog: Blockchain Blog | 25 July 2018

Bank of England confirms renewed payments systems will interface with blockchain

The Bank of England (BoE) has confirmed that its revamped real-time gross settlement (RTGS) system will be compatible with interface systems that run on blockchain-based technology.

What does this mean?

The British central bank has published a report evaluating its recent proof of concept (PoC) with several firms operating in the distributed ledger technology space, a test that aimed to examine the feasibility of connecting blockchain firms to the BoE's RTGS system.

The RTGS system is essential for banking and trading in the UK and handles transactions worth about £500 billion annually, which is equivalent to almost a third of the country's annual economic output.

The upgraded system is meant to be launched in 2020, and will be designed to be resistant to cyber attacks while also being available to "existing and emerging payment infrastructures to access central bank money".

These businesses would then be able to access the system directly, rather than through a proxy of a large bank.

In March this year, the BoE announced that it was running a PoC with Baton Systems, Clearmatics Technologies Ltd, R3 and Token.

The purpose was to understand how a "renewed RTGS service" could support settlement in systems operating on innovative payment technologies, "such as those built on Distributed Ledger Technology".

"All participants confirmed that the functionality offered by the renewed RTGS service would enable their systems to connect and to achieve settlement in central bank money. A number of recommendations were received to ensure optimal access to central bank money."

Based on those recommendation, the BoE said that it will:

• consider how different account structures could be used in the renewed RTGS service;
• explore whether the renewed RTGS service could provide and consume acceptable forms of cryptographic proofs; and
• continue to engage with FinTechs to keep up to date with innovation in payment technology.

Last month, Bank of England Governor Mark Carney announced that a core feature of the bank’s “ambitious rebuild” of the RTGS was to open it to private payment systems, perhaps even DLT firms.

“No longer will access to central bank money be the exclusive preserve of banks,” Carney said.

Next steps

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