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Bank of England Finds New Use Cases for DLT in Synchronised Settlement

The Bank of England and the Bank for International Settlements announced the successful completion of a pilot project based on DLT.

Bank of England Finds New Use Cases for DLT in Synchronised Settlement

Source: motionarray.com

The purpose of this pilot project was to evaluate synchronous payments in central bank money. The prototype of Project Meridian demonstrates how to organize synchronized settlement operations in the money of a financial institution in the case of housing transactions.

Transactions are calculated using the central bank’s money in the RTGS system. The transfer of funds from the buyer to the seller is carried out only if the corresponding asset in another ledger is simultaneously moved in the opposite direction. These measures reduce transaction costs, minimize risks and increase the level of efficiency.

Transactions are carried out with the help of a synchronization operator, which, as part of an experiment, uses distributed ledger technology (DLT) to interconnect the central bank’s settlement system with other financial market infrastructures and ledgers. In this case, the exchange of ownership rights to funds and assets is automatically organized.

The Bank of England and BIS stated that the universal interface can offer synchronization operators a standard way to connect asset registers of various types, including foreign currency, stocks, and bonds, to the RTGS system and central bank money settlements. Risks for counterparties are eliminated. The level of liquidity costs is also reduced. These features of the procedure ensure safety and are justified from an economic point of view.

Francesca Hopwood Road, head of the BIS Innovation Hub in London, said that the results of the pilot project demonstrated the potential to improve the efficiency of existing financial market infrastructures through the use of new technologies such as DLT. She separately noted that the results of the project implementation allow for analyzing the benefits of synchronization and determining the most appropriate approaches to this activity. Francesca Hopwood Road stressed that central banks periodically update their settlement systems.

As we have reported earlier, Bank of England Says Stablecoin Use Need Limits.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.