BoE to undertake new proof of concept involving DLT

The Bank of England has announced that it is undertaking a new proof of concept to understand how its planned real-time gross settlement (RTGS) system could support settlement in networks operating on distributed ledger technology (DLT) and other innovative payment solutions.

The new PoC is part of the bank’s plan to build a new RTGS system that would benefit from advances in fintech, such as DLT. Last April, BoE governor Mark Carney first spoke about the potential benefits DLT could bring to such a system.

A few months later, the central bank announced that it had successfully completed a PoC of DLT provided by Ripple to simulate a real-time payment between two central banks’ systems. However, it later concluded that the nascent technology was not yet ready to power a next generation RTGS system.

Despite this, DLT is still among the factors that are considered, the BoE’s latest release indicates:

“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 said in a statement, published yesterday.

“Therefore, 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 bank added.

To perform the tests, the BoE has partnered with four providers of payment technologies – Baton Systems, Clearmatics Technologies, R3 and Token – with each firm set to engage with the PoC in a number of ways. The central bank expects to publish the results of the tests in the summer.