The Bank of England (BoE) recently released its blueprint for its new Real-Time Gross Settlement System (RTGS), which will aim to meet the challenges posed by the rapidly changing landscape.
The next generation RTGS will be designed keeping in mind five key focus areas – higher resilience, broader access, wider interoperability, improved user functionality, and strengthened end-to-end risk management of the high-value payment system. In particular, the new system will be designed to build capacity to interface with new payment technologies, such as blockchain, as adoption increases.
“As stated in the Consultation Paper, the Bank has decided not to build the renewed RTGS service on Distributed Ledger Technology, in light of its findings that the technology is not yet sufficiently mature to provide the exceptionally high levels of robustness required for RTGS settlement. But the new generation of RTGS will be built with the flexibility needed to ensure it can interface with such technology as and when it is developed in the wider sterling markets”, the blueprint states.
In an online post, Ripple said that the BoE selected it earlier this year through its Fintech Accelerator to test whether blockchain technology could enable this “Global RTGS” capability. The central bank on Monday released the summary results of the proof of concept (PoC).
The PoC explored how distributed ledger technology (DLT) could be used to model the synchronised movement of two different currencies across two different ledgers, as part of the BoE’s wider research into the future of high-value payments. Ripple said that its solution showed potential in enabling RTGS systems which seamlessly support interoperability globally.
“The learnings from this exercise with Ripple have reinforced the Bank’s intention to ensure its new RTGS system is compatible with DLT usage in the private sector, and has highlighted areas where we would like to conduct more exploratory work”, the bank said.
“We believe in an Internet of Value, where cross-border payments should move at the same speed as information – like photos or emails – moves on the Internet today. Critical to making that vision a reality is enabling real-time settlement across domestic systems. To that end, the Bank of England’s PoC with Ripple is a watershed moment. We applaud them for being one of the first central banks worldwide to look at how blockchain technology can power instant international payments”, Brad Garlinghouse, CEO, Ripple, said.
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