Bank of England Successfully Tests Crypto-like Settlement System

Paigambar Mohan Raj
Source: Computerworld

The Bank of England (BoE) has successfully tested distributed ledger technology (DLT) for settling transactions. Crypto projects popularized DLT systems, which they use to verify and keep track of transactions. The BoE successfully tested the use of DLTs in running large and complex interbank transactions.

The BoE conducted an experiment, (called “Project Meridian“) with BIS’s (Bank for International Settlements) London innovation hub. The aim of the experiment was to create a model that might help speed up and lower the cost of transactions in central bank Real-Time Gross Settlement (RTGS) systems.

The RTGS system of the central bank was connected to other financial market infrastructures and ledger as part of the project using DLT. The report stated that the project orchestrated an “exchange in ownership of funds and assets in a resilient and secure way.”

Is crypto tech making its way into the Bank of England?

Banks around the world are trying to bring in DLT systems to improve their efficiency and record-keeping. Moreover, central banks are also trying to use crypto-centric technology to issue digital versions of their currencies. However, a senior BoE official stated in February that using DLT technology for a CBDC might not be powerful enough.

The BIS Innovation Hub is working on a number of projects that look at recent advancements in fintech. The research investigated scenarios in which money could only be transferred from a buyer to a seller if a related asset on a real estate register moved in the opposite direction at the same time.

Although there are several crypto-like technologies, using them would require regulatory changes. The project has shown that synchronized settlements are possible with commercial bank reserves, within the bank. However, the report stated that the deployment of such systems requires “policy, regulatory, and legal” considerations.