The central bank has recently concluded its testing of distributed ledger technology (DLT) for enabling large and intricate interbank transactions, and the results were successful.
The Bank of England utilized the Bank for International Settlements (BIS) London innovation hub to run “Project Meridian” and construct a prototype that has the potential to expedite and lower transaction costs in Real-Time Gross Settlement (RTGS) systems used by central banks.
Through this project, the Bank of England aimed to address the challenges associated with the current RTGS systems used by central banks, including slow transaction speeds and high costs. The prototype built during “Project Meridian” has the potential to reduce these issues, allowing for faster and cheaper transactions.
The Meridian project is one of the many projects that BIS uses to carry out its new research and development projects in the field of fintech and also in cryptocurrency industries, from decentralized finance (DeFi) to Central Banking Digital Currency (CBDC) systems.
According to a statement released by the BIS, representing the central banks worldwide, the project linked the central bank’s RTGS system with other financial market infrastructures and ledgers using DLT. The system automatically orchestrated the exchange of funds and assets’ ownership in a secure and resilient manner.
DLT, or Distributed Ledger Technology, is an innovative technology that has gained traction in the banking and cryptocurrency sectors. It serves as a reliable system for recording transactions. Traditional finance has shown a keen interest in the potential of DLT to enhance and revolutionize the cryptocurrency and banking industries. It can improve interbank transactions and facilitate the development of digital sovereign currencies.
In February, a high-ranking Bank of England official warned lawmakers that utilizing distributed ledger technology (DLT) for a central bank digital currency (CBDC) would be too cumbersome. The project also encountered some challenges along the way.
