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Bank of England and Blockchain: Opportunities and Threats

02.02.2016

биткоин в англии

 Present-day world is changing with an incredible speed. Pace of technology development in the field of payment systems and financial settlements poses a challenge to banks.
   According to Minouche Shafik, the Deputy Managing Director of the Bank of England, the innovative system of distributed ledgers became a real test for banks. It represents a specific indicator of viability for traditional institutions with centuries-old history and provides them with an opportunity to upgrade.
   The Bank of England holds a leading position in the financial system of Foggy Albion and plays a principal role in transactions processed in national currency. To control the financial flow they use the Real Time Gross Settlement system (RTGS), and the average rate of transfers between financial institutions is 500 milliards pounds sterling (almost third part of gross domestic product (GDP) of the United Kingdom).
Versatility of the present-day payment technologies’ mechanism means ease of use and accessibility. The system of distributed ledgers is successfully used not only by banks-competitors but alternative payment institutions as well. Risk of undermining the role of the RTGS system as a third party seems rather real.
   The reality dictates its own terms. A need is recognized for development a program for improvement of existing model of the financial regulatory system. Fundamental innovations will affect all the population of Great Britain. They cannot be implemented only by efforts of the Bank of England.
   According to Shafik, the program will be ready at the end of 2016. Prior to its launching a discussion with the involvement of banking and financial institutions is in order. It is highly desirable to put the plan into practice in 2017.
It is not too difficult to notice few contradictions in the speech of the famous economist. Lack of advices concerning the plan strikes the eye. Shafik’s discourse is focused on specific problems, including:

  • Complexities of predicting trends in development of a payment system, which operates 24/7/365.
  • Validity of universal access of financial institutions to the RGTS system.
  • Feasibility of changing the controlling function of the Bank of England amid vigorous progress of the innovative technology of distributed ledgers.

   The new program is destined to resolve these important questions. Quality of its answers will serve as an efficiency indicator. “Despite the need for changes, innovative solutions should be implemented keeping the stability of the system,” Shafik said.