The Bank of England recently released the blueprint for its next-generation real-time gross settlement system – or RTGS – which will form the core of the UK’s payment infrastructure. One element of the vision set out in that blueprint was potentially adding synchronisation capabilities to its future RTGS system in order to enable payments in RTGS to be executed simultaneously with the movement of another asset. One potential usage of this capability could be cross-border payments, where movements in the sterling RTGS system could be paired with movements of another currency.
Through its Fintech Accelerator, the Bank selected Ripple earlier this year, to test whether blockchain technology could enable a ‘Global RTGS’ capability and has now released summary results of the proof of concept.
The Bank of England’s PoC specifically looked at how Ripple’s solution could support the synchronisation of cash movements made using two simulated RTGS systems utilizing the open-source Interledger Protocol. The ILP Validator created a single source of truth between the two ledgers, eliminating the need for separate processes such as mutual reconciliation between separate ledgers.
The Bank is considering further Proofs of Concepts to extend its understanding of the dimensions of the synchronisation concept. The results from this Bank of England POCs can also be applied to other central banks globally.
The bank noted: “The PoC was a useful exercise to develop the Bank’s understanding of synchronisation and possible technical solutions.”
Brad Garlinghouse, CEO of Ripple, said: “We believe in an Internet of Value, where cross-border payments should move at the same speed as information – like photos or emails – moves on the Internet today. Critical to making that vision a reality is enabling real-time settlement across domestic systems. To that end, the Bank of England’s PoC with Ripple is a watershed moment. We applaud them for being one of the first central banks worldwide to look at how blockchain technology can power instant international payments.”