Bank of England Opens A Payment System that Process Transactions Across a Blockchain Network

By Sumedha Bose

The Bank of England has undertaken a revamping project for its existing payment system between banks. The network will be thrown open to firms that use blockchain to handle transactions. The apex bank of Britain came out with a report examining its latest Proof-of-Concept (PoC) with other companies that work with distributed ledger technology (DLT). This test aimed at evaluating the viability of associating blockchain to the latest Real-Time Gross Settlement (RTGS) service of the bank.

The RTGS handles transactions worth about £500 billion, a fourth of England’s rough GDP, and carries settlements amongst financial organisations.

The Governor of the apex bank, Mark Carney announced in June that the bank’s primary aim in the overhaul was to provide access to private payment systems, including DLT firms. Carney, who is known for not being too enthusiastic about cryptocurrency, noted that the central bank will now move beyond the exclusive domain of banks.

Conducted in March, the PoC saw participation from startups dealing in DLT like Baton Systems, R3, Token, etc. The new report about the trial notes that all participants were sure they would successfully connect to RTGS to handle transactions carried out in the Bank’s currency. They were convinced that the revamped RTGS would allow for a connection with their systems which would enable them to finalize settlements in central bank currency. There will also be an evaluation of whether the fresh RTGS would successfully handle proofs in cryptographic form.

In 2017, the Bank of England collaborated with the blockchain startup Ripple to try out an interledger system fashioned to sync payments amongst apex banks. However, back then, the Bank officials decided that the technology was not yet adequate to support a connection between RTGS and DLT firms.

However, the impending Brexit has now spurred on the country’s banks to take initiative to attract FinTech firms. The Bank of England is optimistic to launch the online RTGS system by 2020.