27 July, 2018
The Bank of England announced earlier this week that it plans to implement blockchain technology in an update of its payments system. The central bank had been developing a “proof of concept” to integrate blockchain—or distributed ledger technology—into its real-time gross settlement system (RTGS), which is a specialist funds transfer system used mainly for high-value transactions by central banks.
The central bank’s RTGS currently handles around $500 billion annually—or one-third of the country’s economic output. The Bank of England hopes that using blockchain in the RTGS will provide “cryptographic proof” in transactions, preventing theft or the alteration of records. The bank also stated that it hopes the improved system will make it easier for smaller businesses to use the RTGS directly without having to go through larger banks. They hope to have the new system implemented by 2020.
This follows a statement back in March, when the central bank first announced its hopes of incorporating distributed ledger technology (DLT) into its RTGS, stating that it “places a high priority on ensuring that the new service is capable of interfacing with DLT as and when it is developed in the wider sterling markets.” Specifically, they were working with payments technology providers to see if they could get DLT to work with a proposed cloud-based RTGS service—and it appears they have been successful.
Earlier this month, a British Tory Party think tank named Freer published a report highlighting how blockchain was being used by Estonia in state projects, and how this saved the country 820 years of working time annually. UK Housing Minister Eddie Hughes, who released the report, also found that blockchain in government systems have the potential to “rebuild societal trust” along with making projects more efficient. He elaborated, “There is no need to audit vast amounts of data, as the blockchain itself is the audit trail.”
Governments are no stranger to the benefits of blockchain. The inherent accountability of the technology, immutability of data on the ledger, and highly increased efficiency compared to other systems currently in place have made its adoption highly favorable as blockchain’s popularity surges in both the private and public sector.
Image credit: “Bank of England” by Katie Chan via Wikimedia Commons.