The Bank of England and the Bank for International Settlements (BIS) Innovation Hub London Center have successfully tested a distributed ledger technology-powered settlements system between the institutions. As a result, the Bank of England will use the insights from this project in its real-time gross settlement (RTGS) system.
The joint pilot project, called Project Meridian, was recently documented in a report published by BIS on April 19. The 44-page document highlighted the successful synchronization of distributed ledger technology (DLT) between the banks for the purchase of houses in Wales and England.
This synchronization network allowed for the transmission of messages between the synchronization network and RTGS system using APIs, providing a generic interface that could be “relatively easily” extended to other asset classes, such as foreign exchange. By extending this system to other asset classes, it could significantly reduce the time, costs, and risks of transactions.
The Bank of England and BIS have been exploring the potential of DLT for financial settlements and transaction processing for several years. They have been working on multiple projects, including a cross-border payments project called Project Stella, which was completed in 2019.
The Bank of England has also been developing its own RTGS system, which is set to be launched in 2022. The new system will be built on modern technology and will replace the current system, which has been in operation for almost 20 years. The integration of DLT technology into the new RTGS system could further enhance its efficiency and security.
DLT technology, also known as blockchain, has the potential to revolutionize the financial industry. Its decentralized and transparent nature allows for secure, efficient, and cost-effective transactions, without the need for intermediaries. It has the potential to streamline the financial system and reduce the risk of fraud and errors.
The successful completion of Project Meridian is a significant milestone in the exploration of DLT technology in financial settlements. The potential for extending the system to other asset classes could significantly enhance the efficiency and security of financial transactions, which would benefit the entire industry.
In conclusion, the Bank of England and BIS Innovation Hub London Center have successfully tested a DLT-powered settlements system through Project Meridian. The synchronization network allowed for the transmission of messages between the synchronization network and RTGS system using APIs, which could be extended to other asset classes, reducing the time, costs, and risks of transactions. This is a significant milestone in the exploration of DLT technology in financial settlements and could enhance the efficiency and security of financial transactions in the future.