Bank of England and BIS achieve breakthrough in global settlements powered by blockchain technology.
The successful completion of Project Meridian, a joint pilot project between the Bank of England and the Bank for International Settlements (BIS) Innovation Hub London Center, marks a critical milestone in international settlement development.
The findings of this project will be incorporated into the Bank of England's Real-Time Gross Settlement (RTGS) system.
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On April 19th, BIS's shared a detailed 44-page Project Meridian report. During the pilot, banks successfully purchased a house in Wales and England using distributed ledger technology (DLT) and a synchronization network.
The report highlights the potential of the synchronization network and RTGS system to be easily adapted to other asset classes, such as foreign exchange, through the use of APIs. This could lead to reduced transaction times, costs, and risks.
Project Meridian's primary goal is to develop a settlement system for central bank digital currencies (CBDC). The report emphasizes the potential advantages for central banks, stating:
Synchronization can provide a catalyst for innovation in wholesale payments and support the emergence of new payments infrastructures that settle using central bank money.
However, several political and operational considerations need to be addressed before the system can be implemented. These conditions include identity verification mechanics and the fact that synchronization services would be limited by the current RTGS operating hours.
Moreover, numerous legal questions must be resolved, such as the final point of irrevocability of the settlement, digital representation of asset ownership, and the prevention of arbitrary use of clients' funds by commercial banks before a transaction date.
Project Meridian's successful pilot marks a significant step forward in blockchain-powered settlement system development. As the technology continues to evolve, central banks and other financial institutions can potentially harness its potential to revolutionize international settlements.
In other UK-related news, in mid-January, the Governor of the Bank of England expressed skepticism about the need for a UK's central bank digital currency (CBDC), the digital pound.
