Bank of England Endorses Blockchain Use with Revamped Payment System
The Bank of England has stated that a revamped payment system currently under development will offer integration and support for fintech firms using blockchain technology. The pronouncement, which the UK’s central bank made on July 23, 2018, will come as a welcome fillip to the British cryptosphere and encourage further blockchain finance development in the country.
Blockchain and Crypto Friendly Britain
Despite the institutional coldness toward crypto, particularly among the City of London’s most prominent financial institutions, the UK remains one of the most crypto-friendly jurisdictions in Europe, both industry and regulators highly regard crypto’s underlying blockchain technology. This had a knock-on effect on the development of blockchain technology in the country.
As a result of a burgeoning growth of startups in the Fintech space that use blockchains and other types of distributed ledger technology (DLT), the Bank of England wants to revamp the existing system that holds up Britain’s banking, payments, and financial trading infrastructure.
By 2020, the Bank hopes to have a future-proof system that offers robust protection against cyber attacks and widened access to a vast number of businesses including those in the blockchain Fintech space. The current Bank of England infrastructure, called the Real-Time Gross Settlement (RTGS) system handles roughly 500 billion GBP every year, a figure that is approximately a third of the UK’s total annual economic output.
Keeping Britain Competitive
At the heart of the BoE’s move toward blockchain, integration is a desire to keep London at the center of Europe’s financial activity. With the UK economy already suffering losses due to the uncertainty caused by Brexit, the last thing any regulator wants is to give any encouragement to skittish investors who may wish to take their business to other European centers like Berlin and Paris.
The financial industry remains by far the most influential performing industry in the UK economy, as well as the country’s most significant service export.
Apart from the presence of financial behemoths in the Square Mile, one of the critical reasons for this dominance is that the country still holds a comparative advantage over its European neighbors in the field of Fintech and blockchain innovation.
The British government thus sees blockchain technology as an avenue to maintain the UK’s leadership position regarding financial technology and innovation. In the statement, the BoE confirmed that it has coordinated efforts with blockchain-based fintech firms to ensure they are carried along with the revamp efforts.
The statement reads in part:
“All participants confirmed that the functionality offered by the renewed RTGS service would enable their systems to connect and to achieve a settlement in central bank money. A number of recommendations were received to ensure optimal access to central bank money.”
BTCManager earlier reported that the Bank of England had been involved in a series of efforts to bring blockchain into the fold, ranging from a fintech accelerator with Ripple to a blockchain challenge for crypto entrepreneurs and startups.