Whilst The Bank of England continue to explore the potential behind blockchain technology and cryptocurrency, as a part of the UK Crypto taskforce, we wish to explore some of the implications this sort of technology could have for The Bank of England specifically. Interestingly, Reuters have recently reported such a scenario, that discusses just how the bank might tap into Distributed Ledger Technology (DLT). You can see the full report by Reuters, here. According to the report:
“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.”
“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.”
By using cryptocurrency and blockchain technology to ‘revamp’ the current Real-Time Gross Settlement system, The Bank of England have an opportunity to renew and streamline their entire service. Of course, this doesn’t mean that The Bank of England will begin to issue Bitcoin as a sovereign currency, but, they could use this as a way to at the very least, integrate a blockchain authentication system which would be designed to make transaction approval by the bank, far more efficient. According to The Bank of England:
“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.”
We should consider that in October 2014, according to Reuters, the RTGS system experienced a fault which in turn caused a major outage, something that could be avoided if the entire system moved over to the blockchain or a DLT based system instead. The important focus seems to be security, this is something The Bank of England are very keen to improve and thus we do expect to see the blockchain integrated into this area of their service, simply because it can provide an unmanned security checkpoint, one that can in turn ensure the security of the banks assets, be that crypto or indeed FIAT.