The Bank of England (BoE), the UK’s central bank, is exploring the opportunities standing behind blockchain technology and digital currencies. On Monday, the institution published a report showing that the BoE is interested in revamping its entire system and using distributed ledger technology for providing its services. Its aim is strengthening defenses against cyber-attacks and widening the number of businesses that can use the bank’s system.
The report reads:
“The Bank of England is aiming to revamp the system that underpins British banking and trading in the City of London by 2020 to strengthen defences against cyber-attacks and widen the number of businesses that can use it.”
The Real-Time Gross Settlement (RTGS) system of the bank handles transactions worth around 500 billion pounds, equal to almost a third of Britain’s annual economic output. In April of this year, the BoE announced its plans to make an upcoming version of the RTGS system compatible with the blockchain technology.
“Its Real-Time Gross Settlement (RTGS) system handles transactions worth around 500 billion pounds – equivalent to almost a third of Britain’s annual economic output. In March this year, The Bank of England announced a “proof of concept” with several firms to see what changes would be needed to the proposed revamp of RTGS to support settlement with firms that use blockchain, the technology used to record transactions in cryptocurrencies like Bitcoin.”
The Bank of England states:
“The functionality offered by the renewed RTGS service would enable their systems to connect and to achieve settlement in central bank money. A number of recommendations were received to ensure optimal access to central bank money.”
Britain’s government is keen for the United Kingdom to be a leading center for fintech innovation like payments and blockchain. Recently, conservative member of the British Parliament Eddie Hughes said that the government should focus its attention on using blockchain, as it would enable social freedom, increase efficiency and rebuild societal trust.
The U.K.’s financial regulator, Financial Conduct Authority (FCA), started to recognize the benefits that blockchain technology can bring to the society as well. Recently, FCA announced that 29 companies were accepted to compose the fourth cohort of its regulatory sandbox.
The announcement made by the Bank of England does not mean that it is going to issue Bitcoin as a sovereign currency, however, integrating a blockchain authentication system can make transaction approval by the bank far more efficient.