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The UK’s central bank has developed its own Proof of Concept ledger and will make the next version of its interbank payments system compatible with settlement in a distributed ledger.
The governor of the Bank of England, Mark Carney, has announced that an upcoming version of the bank’s real-time gross settlement (RTGS) system will be compatible with the blockchain technology.
The Bank of England had spoken about the plans to leverage the distributed ledger technology before, and conducted a research last year on most effective way to implement the technology.
Speaking at the UK’s first International Fintech Conference in London on Wednesday, Carney noted the distributed ledger technology could transform the financial sector, improving payments, clearing and settlement processes. Blockchain, he also added, will help banks to save tens of billions of pounds and make the system more resilient.
The blockchain technology will let banks and other financial organizations to directly interact with each other, eliminating the need to deal with third parties like clearing houses.
“Securities settlement seems particularly ripe for innovation. A typical settlement chain involves many intermediaries, making it comparatively slow and keeping operational risks high. Industry has begun to work together to determine how distributed ledger technologies could be used to solve these issues at scale,” Carney said.
However, Carney noted that the UK Financial Conduct Authority (FCA) said earlier this week that settlement times could be reduced with the use of existing technologies.
“This requires market participants to change their collective practices as it takes more than one intermediary in a chain to compress settlement times,” he said.
Carney has also mentioned during his speech that the Bank of England is a member of the Linux Foundation-led open-source Hyperledger blockchain project, which it joined last year. Besides, the bank is working with fintech companies and is now accepting applications for the fourth round of its accelerator program.
London has undoubtedly turned into the main fintech capital of the world, but according to Taavet Hinrikus, who also took part in the conference, this happened thanks to being part of Europe. Hinrikus is the chief executive of one of UK’s major fintech startups, TransferWise, which he co-founded with his fellow Kristo Kaarmann.
While speaking at the event, he said Brexit made it harder to attract new talent what doen’t help businesses and added that he would not select London as a location to open his business today.
“What’s been great for the UK, is that the UK is still part of Europe. Having a single regulator giving access to 500 million consumers makes a huge difference,” Hinrikus noted. “500 million people that can come and work here make this a very exciting place for immigrants like myself.”
“Home grown or immigrants it doesn’t really matter; we just need the best talent. When it comes to immigrants, we need it to be easy to import talent and we need to make these people to be happy and welcome.”
Still, London, along with Singapore, remains to be the world’s main fintech hub, according to a new report by Deloitte. The company analyzed 44 fintech centers and found that London and Singapore are the best places to set up and grow fintech business, followed by New York and Silicon Valley.