Bank Of England Confirms Revamped Payments System’s Compatibility With Blockchainbr>
The Bank of England (BoE), UK’s central bank, has confirmed that its payments system will be able to hook up with FinTech firms using blockchain technology.
Last month, BoE Governor Mark Carney said that the BoE will execute an “ambitious rebuild” of its Real Time Gross Settlement (RTGS) system, which serves as the “backbone of every payment in the UK.” He said they will re-organize the existing RTGS so that private payment platforms, including those using distributed ledger, could plug in directly to the bank’s system.
On Monday, the bank published a summary of the outcomes of a proof-of-concept (POC) that was conducted with Baton Systems, Clearmatics, R3 and Token in March of this year. The goal of the POC was to understand how a renewed RTGS service could be capable of supporting settlement in systems operating on innovative payment technologies, such as those built on distributed ledger technology (DLT).
According to the bank, 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. Baton connected their DLT-based platform to the API and simulated the ability to process settlements on behalf of members. It demonstrated the ability to set minimum balances, make margin payments, fund and defund accounts, and settle obligations using central bank money, reconciling balances between their ledger and RTGS.
Clearmatics was able to test funding and defunding of RTGS collateral accounts, reflecting these movements on their ledger. Clearmatics could then simulate trades between account holders on their DLT system and apply the net settlement to RTGS accounts.
However, some limitation were identified, which the BoE said it will address. R3 said a blockchain platform could interact with RTGS more efficiently if the bank ran a node on the network or if a cryptographic proof was provided to show that a particular transaction had occurred.
Participants also highlighted the importance of continued engagement with FinTech firms, noting the need for the BoE to continue to keep pace with developments in technology and payment system innovation.