The Bank of England (BoE), the highest monetary authority in the UK, said its payment system could use distributed ledger technology (DLT), better known as blockchain technology, to interconnect with FinTech companies and protect itself from cyber attacks.
In a statement released recently, the BoE said a revamped Real Time Gross Settlement System (RTGS) should be able to link to Financial Technology (FinTech) firms using distributed ledger technology (DLT), also known as blockchain technology.
At the end of March this year, the British Central Bank announced the launch of a Proof of Concept (PoC), supported by Baton Systems, Clearmatics Technologies Ltd, R3, and Token. The purpose of the test was to discover ways in which the use of blockchain or DLT technology could facilitate a renewal of the RTGS system so that a diverse and flexible range of settlement models could be offered.
According to the document summarising the objectives and results of the PoC, “all participants confirmed that the functionality offered by the enhanced RTGS service would allow their systems to connect and achieve settlement of central bank money.”
Once the objectives of the PoC have been met, the Bank of England intends to investigate whether the RTGS service could acceptably record crypto evidence.
The Bank of England (BoE) to employ blockchain technology (distributed ledger technology) for payments
The crypto tests mentioned above, as explained in the BoE publication, are about functions that allow authentication of a user’s identity and protection of valuable information located on the network.
According to Reuter, the RTGS underpins British banking and commerce in the City of London. Through this system, there is a money supply of around 500 billion GBP, equivalent to almost a third of Britain’s economic output. The news agency said the system is expected to be ready for renewal in 2020, “to strengthen defenses against cyber-attacks and expand the number of companies that can use it.”
On the other hand, the BoE has carried out other concept tests related to blockchain technology, which it has been researching since 2016. In April of this year, the results of a study conducted by this financial institution were released, which verified the feasibility of a decentralized distributed ledger technology (DLT) platform with sufficient privacy for sensitive data.
The integration of traditional payment systems and blockchain technology, which supports cryptocurrencies, is in the interest of the financial sector globally. Recently, Mastercard registered a patent on a system that would allow the banking network of fiat currency payments to be interconnected with cryptocurrencies, through the blockchain technology.