A blockchain-based ledger for payments and settlements could eventually help the United Kingdom’s finance industry, which processes $14.5 trillion worth of payments a year, says the country’s finance trade body.
The Sept. 17 comments from UK Finance came after the end of what it said was a successful experimental phase of the Regulated Liability Network (RLN), a blockchain-based ledger for central bank digital currencies (CBDC) and tokenized assets.
UK Finance said the RLN could support innovation and deliver new financial functions like programmable payments as it summarized findings from an experimentation phase of the network with 11 banks.
The trade group called for “further engagement with regulators and other public bodies” to develop the RLN, which it said could reduce fraud and the cost of failed payments.
The UK’s legal and regulatory framework “is sufficiently flexible” to support what UK Finance called a “platform for innovation” — but needs “further implementation and regulatory engagement.”
“The private sector wants to invest in the future of commercial bank money, and a partnership with regulators is the best way of successfully making this happen,” said UK Finance’s managing director of payments, Jana Mackintosh.
The RLN uses distributed ledger technology (DLT) and is mainly intended for use by commercial banks to help with what Mackintosh said is the $14.52 trillion (11 trillion British pounds) worth of payments processed every year in the UK.
A diagram from the RLN white paper depicting a transfer between commercial banks with each having access to a central bank reserve Source: The Regulated Liability Network
The ledger can house wholesale CBDCs, commercial bank money and electronic money with each entity that has access to it able to record, transfer and settle funds — along with tokenizing and programming payments and settlements and locking and unlocking funds.
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One finding from the experiments was that the RLN could give new firms a “common point of access” to — and enable them to interface with — “established institutions and enhanced payment and settlement systems,” UK Finance said.
It also claimed the platform could help meet objectives for the UK payments industry set out by a July Bank of England discussion paper, namely “the aims of maintaining the singleness of money and promoting sustained innovation.”
The trade group started the experiments in April, working with the banks Barclays, Citi, HSBC, Lloyds, Mastercard, NatWest, Nationwide, Santander, Standard Chartered, Virgin Money and Visa.
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