The Bank of England is doing a proof-of-concept (PoC) to see how the updated Real Time Gross Settlement (RTGS) service can interact with Distributed Ledger Technology (DLT), according to a bank statement dated March 27.
The Real Time Gross Settlement System is a special payment system in which funds transfers will be made between banks in "fast time" and on "gross basis". This means that transactions are completed soon after
processed one by one without connecting with other transactions. The RTGS system is typically used for high value transactions and requires an instant opening and can be operated by the country's central bank.
In May 2017, the Bank of England issued an RTGS blueprint, claiming that the new service would provide "more flexible models" to ensure the payment infrastructure has direct access to the central bank. The Bank will then announce its intention to develop a payment service compatible with Blockchain technology, but in the announcement recently the bank has rejected the idea of migrating to DLT completely due to technological immaturity:
"Although the Bank has concluded that Distributed Technology (DLT) is not mature enough to provide the core for the next generation of RTGS, it places a high priority to ensure that new services are able to interact with DLT and can be developed in the broader sterling market. "
Bank UK will work with companies such as Baton Systems, Clearmatics Technologies Ltd, R3, and Token, which develop payment solutions using innovative technology. The project parties will check the DLT-based payment system's ability to interact with updated RTGS services and eligible ways in which "service functionality can be expanded." The Bank plans to report their findings later this year.
This week, the European Central Bank (ECB) along with the Bank of Japan (BoJ) released their study of the potential of Blockchain to change securities.