The Bank of England wants to open its interbank settlement service to blockchain technologies as part of a major revamp of the system.
The bank is not suggesting that U.K. banks should begin processing bitcoin payments as a matter of routine. However, it does want the replacement for its ageing real-time gross settlement (RTGS) system to be ready for whatever the industry is likely to throw at it when it goes into service in 2020.
It identified five key strategic drivers for the new RTGS system in a consultation document, "A new RTGS service for the U.K.: safeguarding stability, enabling innovation," published Friday. Among them, it lists the need to interface with new technologies such as distributed ledgers. These are often referred to as blockchains, and include systems such as bitcoin and Ethereum.
In the bank's view, these systems -- and, indeed, the entire concept of distributed ledgers -- are still in their infancy, but if they achieve critical mass, it wants to be ready for them.
Many things will have to change between the existing RTGS system, built in 1996, and its successor, to make this possible.
Chief among these is the introduction of longer working hours. The existing RTGS closes for 12 hours each night, but bitcoin servers run nonstop, typically approving transactions within minutes. The bank is proposing the new one have "the capacity to operate on a true 24x7 (or near 24x7) basis," wisely reserving at least the possibility of a nightly nap.
There's also the need for enhanced security if it opens up its payment backbone to allcomers.
It's not just about linking up with external blockchains, though: The bank will, it said, also continue to explore the use of distributed ledgers in its own systems, including through its own startup accelerator, which will shortly begin selecting a second round of participants. The first round includes a security assessment service, BitSight; a data anonymization tool, Privitar -- and a blockchain demonstration platform developed by the bank and PWC to explore the possibilities of smart contracts.
"The resilience characteristics of the distributed ledger in particular are potentially highly attractive from a financial stability perspective," the bank noted.
But it pretty much ruled out the possibility that the new RTGS would be blockchain-based.
"The technology is not sufficiently mature to provide the exceptionally high levels of robustness required for RTGS settlement. Further work is required to address privacy and system scalability in particular," the consultation document said.
The current RTGS settles £500 billion (US$660 billion) between banks every day -- almost a third of the U.K.'s annual GDP. It's central to financial life in Britain -- as many found in October 2014, when part of the system had to be taken offline for a few hours due to technical problems.