With close to a decade since the invention of Bitcoin’s blockchain, there has certainly been a lot of improvement in the blockchain industry so far. Traditional financial institutions have come a long way, and now appreciate the potential of blockchain as a revolutionary technology.
According to reports, Bank of England is looking to use blockchain technology to rebuild its Real Time Gross Settlement systems (RTGS) so as to integrate a private business interface platform that will accept private payments directly from other payment platforms.
In a speech at Mansion House in London, during the announcement made on June 21st, Mark Carney (the Governor of Bank of England) said that the project is set to be an “ambitious rebuild” considering the fact that the RTGS system is designed to be “the backbone of every payment in U.K.” According to him, the system will be useful in moving large volumes of funds from one bank to the next .
What Will the New RTGS System Do?
In his announcement, Carney further mentioned that the bank’s “hard infrastructure will be future-proofed” to the imagination of customers “opening up a range of potential innovations in wholesale markets, and corporate banking and retail services.”
As a result of the integration of blockchain with the existing RTGS system, any platform with a private payment option will be able to link directly to Bank of England’s system. To further fast-track the platform’s development, Carney mentioned that the bank is currently working with a variety of partners including the Monetary Authority of Singapore, Bank of Canada, and a couple of organizations in the private sector. The main objective of the project is to upgrade DLTs with an initiative that will improve cross-border payments between banks.
The bank had already released the Proof of Concept paper in May last year. However, after careful deliberation, the bank realized that blockchain’s capacity for being integrated with RTGS systems was still lacking at the time.
Balancing Privacy With Data Sharing
This year, the bank has released another PoC paper – this time in April. This time, the PoC looked at ways through which blockchain can be used to configure DLT systems so as to maintain privacy between transacting parties, while maintaining data sharing on the platform.
While pursuing privacy with transactions, Bank of England is also looking to be regulation-friendly with a central authority that is capable of issuing and retiring units of an asset. The central authority will also be able to give permission to actors on the platforms or offer access to grants as well. However, even with a central authority, the PoC paper indicates that only the regulator will be able to get access to transactional details.
In his closing remarks, the bank’s Governor said that he believed that the upgraded system has huge potential returns. According to Carney:
Cross-border payments can cost ten times more than domestic ones. We estimate that in the U.K. alone there is scope to realize annual savings of over £600 million. Most fundamentally, the more seamless are global and domestic payments, the more U.K. households and businesses will benefit from the new global economy.
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What are your thoughts on the Bank of England getting upgrading its RTGS systems with Blockchain? Share your thoughts and opinions in the comments section.