UK’s Central Bank Plans to Overhaul Its Payment Settlement System To Interface With Blockchain Platforms

During the latest speech at Mansion House in London on Thursday, June 21, Bank of England Governor Mark Carney announced that the central bank will soon implement an “ambitious rebuild” of its Real Time Gross Settlement (RTGS) system to interface with other private businesses and payment platforms using the blockchain technology.

As a part of the overhaul of its payment settlement system, private payment systems using DLT can easily interface with the platform. Carney said that this new implementation will serve as  the “backbone of every payment in the UK.”

The overhaul of its existing RTGS system will allow other private platforms to connect directly to the central bank’s system which will be applicable even for cross-border payments. Carney also specifically mentioned that other platforms using DLT, however not mandatory, could be connected to the bank’s network.

He said: “RTGS is being re-built so that new private payment systems, including those using distributed ledger, can simply plug into our system. Our new, hard infrastructure will be future-proofed to your imaginations, opening up a range of potential innovations in wholesale markets, and corporate banking and retail services. No longer will access to central bank money be the exclusive preserve of banks.”

The governor additionally stated that the Bank of England has already begun working with the Bank of Canada, the Monetary Authority of Singapore, and other private banking organizations for establishing inter-bank cross-border payments along with other blockchain initiatives.

Carney said: “The potential returns are large. At present, cross-border payments can cost ten times more than domestic ones. We estimate that in the U.K. alone there is scope to realize annual savings of over £600 million. Most fundamentally, the more seamless are global and domestic payments, the more U.K. households and businesses will benefit from the new global economy.”

Carney said that the arrival of the new payment system would help to combat the money laundering and terror financing activities while at the same time would provide an easy access to the domestic and international financial systems.

The Bank of England started exploring the proof-of-concept (PoC) for its new payment settlement system, earlier this year in March 2018. However, at that time the bank said that DLT is still not matured enough to provide the basis for the next generation RTGS systems.

But the bank has always put blockchain as the high-priority for payment system implementation. In April 2018, the bank also released a PoC working paper stating how to configure DLT while ensuring privacy among participants, keep all the shared data across the network, and also let a regulatory body to see all the overseas transactions.