The Bank of England has rolled the dice on a long-awaited experiment with blockchain technology for its settlement system.
The UK central bank has started piloting a proof of concept for real-time settlements of transactions in pounds sterling.
The Bank of England (BoE) said in a statement it was testing a blockchain system that would affect the way it processes payments.
“The bank is undertaking a Proof of Concept (PoC) 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 DLT,” the statement read.
The BoE added that it was building partnerships with several firms to make the blockchain possible, giving it “broader insight into the range of functionality.”
The central bank expects to report its findings later in the year, perhaps considering adoption if the technology is found sufficiently mature.
This project does not spring out of nowhere as BoE governor Mark Carney announced almost a year ago the institution’s intention to prioritize blockchain technology.
“New technologies could transform wholesale payments, clearing and settlement. In particular, distributed ledger technology could yield significant gains in the accuracy, efficiency and security of such processes, saving tens of billions of pounds of bank capital and significantly improving the resilience of the system,” he said.
The fact that the BoE is keeping its word might put pressure on other banks to attempt to integrate blockchain technology into their own infrastructures.
However, the bank said in that same statement the technology “is not yet sufficiently mature to provide the core for the next generation of RTGS,” meaning that it is are engaging in this project more out of curiosity than faith.
We have heard many European leaders, including the very architect of the MiFiD II legislation, say that blockchain technology is worth pursuing despite the fact that it is immature.
The BoE’s project might just be a manifestation of that sentiment.
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