Bank of England To Open Settlement System To Blockchain Platforms

Announcements, Blockchain, News | June 25, 2018 By:

The Bank of England (BoE), UK’s central bank, is planning to overhaul its Real Time Gross Settlement (RTGS) system to allow private payment systems, including those using blockchain technology.

Speaking at Mansion House in London, BoE Governor Mark Carney said that the bank will execute an “ambitious rebuild” of its RTGS, 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 could plug in directly to the bank’s system.

“RTGS is being re-built so that new private payment systems, including those using distributed ledger, can simply plug into our system,” said Carney. “Our new, hard infrastructure will be future-proofed to your imaginations, opening up a range of potential innovations in wholesale markets, and corporate banking and retail services. No longer will access to central bank money be the exclusive preserve of banks.”

The RTGS is also being re-configured to lower the excessive costs of cross-border payments. The governor said that the bank has begun working with the Bank of Canada, the Monetary Authority of Singapore, and some private-sector organizations to upgrade inter-bank cross-border payments, including initiatives based blockchian technology.

“The potential returns are large. At present, cross-border payments can cost ten times more than domestic ones,” said Carney. “We estimate that in the UK alone there is scope to realize annual savings of over £600 million. Most fundamentally, the more seamless are global and domestic payments, the more UK households and businesses will benefit from the new global economy.”

Carney added that the new RTGS will improve access to the domestic and global financial system, support greater choice and competition for corporate end-users, and advance anti-money laundering and combating the financing of terrorism efforts.

The RTGS renewal Proof-of-Concept (PoC) was initially proposed in May 2017. In April of this year, the BoE released a PoC paper that explores how blockchain systems could be configured to ensure that no party (except for the regulator) was able to infer details about transactions which they were not counter-party to, and how the choice of privacy solution affected the performance of the system, as well as the trade-offs, risks, and challenges this presents.