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Bank of England to Open Settlement System to Private Firms, Distributed Ledgers

Last Updated March 4, 2021 5:09 PM
Josiah Wilmoth
Last Updated March 4, 2021 5:09 PM

The Bank of England remains bearish on bitcoin, but the central bank has announced plans to overhaul its settlement system to allow private payment systems, including those based on blockchains and other types of distributed ledgers, to interface with the platform.

Bank of England Governor Mark Carney announced the plans in a speech  delivered on Thursday at Mansion House in London, explaining the bank will execute an “ambitious rebuild” of its Real Time Gross Settlement System (RTGS), which serves as the “backbone of every payment in the UK.”

The revamped RTGS will allow private payment platforms to connect directly to the central bank’s system — even for cross-border payments. He specifically stated that platforms using distributed ledger technology (DLT) — which includes, but is not limited to, blockchains — will be able to connect to the bank’s network.

“RTGS is being re-built so that new private payment systems, including those using distributed ledger, can simply plug into our system. Our new, hard infrastructure will be future-proofed to your imaginations, opening up a range of potential innovations in wholesale markets, and corporate banking and retail services,” he said, adding:

“No longer will access to central bank money be the exclusive preserve of banks.”

That’s a remarkable about-face for the bank, which just last year partnered  with blockchain startup Ripple to trial an interledger system that would synchronise payments between central banks. The test did not involve Ripple’s XRP token — or even, strictly speaking, blockchain technology — and the bank concluded at the time that DLT was “not sufficiently mature” to support RTGS.

Despite this increasing openness to DLT, Gov. Carney has remained one of bitcoin’s most fervent critics. Earlier this year, he said that the flagship cryptocurrency, along with its peers, is “failing” as a currency and should be saddled with more regulations.

“The long, charitable answer is that cryptocurrencies act as money, at best, only for some people and to a limited extent, and even then only in parallel with the traditional currencies of the users,” he said in a March speech at the Scottish Economics Conference. “The short answer is they are failing.”

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