Bank of England Works with Blockchain Technology for New Payment System

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Blockchain technology is being used by several companies and industries around the world. Even banks and governments are using and testing the technology. Now, the Bank of England us undertaking a proof-of-concept (PoC) in order to better understand how blockchain technology would work with the Real Time Gross Settlement (RTGS) service.

Bank of England Uses Blockchain Technology

The so called, Real Time Gross Settlement systems, are special payment systems where banks transfer funds in real time and on a “gross basis.” Transactions are settled immediately after they are processed without linking it with any other transaction.

Bank of England

The Bank of England has launched in 2017 a renewed RTGS service that would ensure payment infrastructures have access to central bank money. At the same time, the bank announced that it had the intention to work with a payment system that would be compatible with Blockchain technology.

In a statement, the bank explains:

“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 Bank will also be cooperating with other companies like Baton Systems, Clearmatics Technologies, R3, and Token. All of them are developing payment solutions that use innovative technologies. These enterprises will examine the DLT payment system in order to interact with the RTGS service. Additionally, they will try to find ways in which the service could expand its functionalities.

Cryptocurrencies Could Keep Expanding

UK City Minister, John Glen, explained that the cryptocurrency market is not a threat for the economy. The UK is analysing the possibility to regulate the cryptocurrency market, but it is always important to leave some space for the industry to keep growing.

Mr Glen said that cryptocurrencies need a proportionate level of regulations that would give certainty to the market and that would allow innovation to spread.

Glen explained:

“The issue is, how do we regulate or not, how do we enable or not, based on the blend of opportunities and risks that may exist in this new technology. Regulation could be an enabler of a state, flourishing cryptocurrency exchange in the City of London.”

Similar comments have been given by Mark Carney, Bank of England governor. He claimed that cryptocurrencies are too small and limited to threaten the financial system as we know it today.

The G-20 summit has also shown little interest to create strong regulations around Bitcoin, cryptocurrencies and blockchain technology. Banks have an important potential to develop if they embrace cryptocurrencies and blockchain technology.

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