A Digital Pound May Be in the Works as Bank of England Introduces a New Settlements Network

The United Kingdom is currently in the process of creating a new network for payments that may possibly be supporting a digital form of the sterling. The possibility came in a recent revelation while looking into the new real-time gross settlement service (RTGS) that the bank is working on. The RTGS is a network that all financial institutions in the UK use for transactions. it seems that the new network will have the ability to support a central bank digital currency (CBDC) as well.

However, while it does seem like a huge possibility, there is still not real confirmation present on the matter. In fact, the service is being treated as an add-on to the conventional settlement service, something that the Bank of England may “attach” to the network if they decide to go ahead with the plan. There are other capabilities being tested as well, including a possible digital pound, as the bank gears to launch the new system.

Keep in mind that the RTGS plays a key role in the British economy by playing a central role for all financial institutions. This is where all the big institutions in the country have all their sterling accounts being held. In addition to that, the RTGS also provides the main source for the Bank of England to inject money into the British economy whenever needed. The size of the network in terms of financial worth is quite massive already. The RTGS is responsible for clearing transactions worth more than £685 billion (or $900 billion) every single day!

To deal with the incredible level of technological input required for the new system, the Bank of England announced its partnership with the Irish technology solutions firm Accenture. The contract given to Accenture is worth £150 million ($195 million) and would result in the development of the new payments network in its entirety. Accenture also released a statement regarding the contract, saying that the new RTGS system will be equipped with the tools required to make it in tune with the constantly changing financial system of the UK. The system would provide access to a lot more firms that it did previously, and it would also offer greater functionality and interoperability with other systems and firms.

According to the information released regarding the contract and the development process, the new RTGS system is expected to be live somewhere during the year 2022.

Bank of England has been in existence for about 400 years now and a lot of changes have come in the way it operates. The bank’s management also seems to realize the importance of adapting to new financial systems including a digital currency as well. Andrew Bailey, the Governor for the Bank of England also remarked that the bank has had in serious consideration, the launch of a CBDC.

There have been previous comments from bank officials as well regarding their willingness to launch a digital currency. Multiple officials also said that the bank was willing to have private organizations take on larger roles in launching a digital pound. However, the bank did specify that that would only be possible if the firms involved in such a process stayed in line with the policies and design the bank had for launching a digital pound.

China Ready to Dominate the Blockchain Market

China has been quite busy building a massive blockchain network under the directions of the Chinese government and things are about to come full circle. BSN, the official infrastructure for blockchain, will be ready to launch its services to the whole world by next month.

However, there is an especially important factor that comes into play, the network’s reliance on American cloud services. With the U.S and China relationships already in a volatile state, the network could present a whole new set of geopolitical risks for the network. The coronavirus outbreak is continuously worsening the relationship between China and the USA and this is only increasing the risk that the network will be in as the time goes by.

It is no secret that the USA and China have had clashes when it comes to technology and a “race” has always been present between the two countries. A key event that marked this tension was the banning of Chinese tech giant Huawei in the United States, leading to the company’s new phones losing access to Google services.

The network is currently relying majorly on three key American firms for cloud services, Microsoft, Amazon Web Services (AWS), and Google.  Facebook’s CEO Mark Zuckerberg also commented on the rising tensions between the two countries, saying that this competition is a zero-sum game. Paul Triolo, Eurasia Group’s geo-technology head also commented on the matter saying “China tries to grab the lead in blockchain and dominate this domain and that may end up putting this BSN project further into the spotlight of the U.S.-China tech competition.” With no foreign firms participating in BSN, China intends to launch a global infrastructure that would be “autonomously innovated by Chinese entities.”

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