Bank of England considering digital ledger for RTGS revamp
(1 February 2016 – United Kingdom) Britain’s payment settlement system for the pound sterling is to be redesigned and rebuilt, according to Minouche Shafik, deputy governor for Markets & Banking at the Bank of England (BoE).
In a speech given at the BoE to senior figures in the UK payments business, Shafik said the Real-Time Gross Settlement System (RTGS) “is the beating heart of the UK payment system”.
The technology is now twenty-years old, and settles around £500 billion (A$1 trillion) between banks – around a third of the UK’s annual GDP – each day.
Highlighting developments in retail payments, such as the UK’s Faster Payments system, and the introduction of the Payments Systems Regulator (PSR) in 2015, Shafik noted that a 24/7 model of payments was now required by consumers and businesses.
“The emergence of various forms of Distributed Ledger Technology (DLT) poses much more profound challenges because it enables verification of payments to be decentralised, removing the need for a trusted third party,” she said.
“It may reshape the mechanisms for making secured payments: instead of settlement occurring across the books of a single central authority (such as a central bank, clearing house or custodian), strong cryptographic and verification algorithms allow everyone in a DLT network to have a copy of the ledger, and give distributed authority for managing and updating that ledger to a much wider group of agents. The Bank is undertaking work to understand the implications of new digital or e-monies and new methods of payments and financial intermediation as part of the One Bank Research initiative.”
Citing the potential of other technologies which are being embraced by banks and non-banks alike, and the risks created by operating a faster model of payments – such as a reduced window to check against fraud and money laundering, Shafik said that the BoE has will allow the scope of the blueprint to be broad, to weigh up all of the technological options and their implications.
“Our aim is that by the end of 2016 we will have agreed a blueprint for high-value sterling settlement in the years ahead, with technological development of that blueprint beginning in 2017,” she concluded.
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