Recently, the Bank of England has completed its testing of distributed ledger technology (DLT) for facilitating complicated and large-scale interbank transactions, and the outcomes were positive.
The Bank of England used the Bank for International Settlements (BIS) London innovation center to run “Project Meridian” to construct a prototype that might speed up and decrease transaction costs in Real-Time Gross Settlement (RTGS) systems used by central banks.
With this project, the Bank of England attempted to solve the problems with the RTGS systems that central banks are currently using, such as their poor transaction rates and expensive costs. The prototype created as part of “Project Meridian” may lessen these problems, enabling transactions to be completed more quickly and for less money.
The Meridian project is only one of the numerous that BIS employs to carry out its ongoing research and development initiatives in the cryptocurrency and fintech sectors, ranging from decentralized finance (DeFi) to central banking digital currency (CBDC) systems.
The RTGS system of the central bank was connected with other financial market infrastructures and ledgers using DLT, according to a statement made by the BIS, which speaks for all central banks globally. The technology automatically coordinated the transfer of money and ownership of assets safely and reliably.
DLT, or distributed ledger technology, is a cutting-edge technology that has gained interest in the cryptocurrency and banking industries. It functions as a reliable mechanism for keeping track of transactions. The potential of DLT to improve and disrupt the bitcoin and banking sectors has drawn significant attention from traditional finance. It can enhance interbank transfers and speed up the creation of digital sovereign currencies.
A senior Bank of England staff member advised legislators in February that using distributed ledger technology (DLT) to create a central bank digital currency (CBDC) would be too laborious. Along the road, the project ran across various difficulties.