Bank of England Announces Plans for DLT Test

The Bank of England has confirmed this week that it intends to embark on a new proof-of-concept development for real-time gross settlement, becoming the latest major central bank to commission work on blockchain applications.

The bank, which serves as the central bank for the U.K., first mooted the development back in 2017, after previously dismissing the idea of moving the financial system wholesale to a blockchain system.

However, the intention to develop the real-time gross settlement infrastructure on blockchain still represents a significant step forward for the bank, toward taking advantage of the technology within the U.K. financial ecosystem.

According to a statement from the central bank, which referenced a lack of sufficient maturity in the technology at the moment, the development of the real-time gross settlement technology will focus on the interface between blockchain technologies, for easier implementation in future.

“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 project will examine ways of ensuring “innovative settlement systems,” like those offered by blockchain, can effectively interact with its envisioned new model for real-time gross settlement, which would enable further interoperability of systems in future.

Drawing on skills and expertise from a number of development partners, the Bank of England project will feature contributions from R3, Baton Systems and Token, and Clearmatics, among others.

Their work will also aim to identify opportunities to expand the technology in future, potentially into other applications within the financial system. Initial results from the proof-of-concept are expected to be published later this year, although no firm date has been set yet.

According to the central bank, its decision to work with a number of different development partners will allow a “broader insight into the range of functionality the bank might need to offer to support this sector.”

The progress of the proof-of-concept will be noted keenly by other central banks around the world, with many already considering or actively developing their own initial blockchain applications for their respective financial systems.