The UK central bank is updating the RTGS payment and settlement system so that it can support the operation of the government cryptocurrency in the future if it is released.
The Bank of England wants the updated Real Time Gross Settlement System (RTGS) - the payment network used by UK financial institutions - to be directly compatible with the government's cryptocurrency.
The new settlement system is being developed so that the Central Bank can use the mechanism for transactions with digital currencies. Modules for other capabilities, including the digital pound, are also being considered as components of the future settlement system.
RTGS is a key element in the UK financial infrastructure. In this system, institutions maintain their accounts in pounds sterling and act as the main channel through which the Bank of England can inject liquidity into the economy. On average, RTGS trades over £ 685bn every day.
On Thursday, the Bank of England announced it had struck a £ 150m deal with Irish consulting firm Accenture to modernize its payments network. According to Accenture, the new RTGS network is adapting to the changing financial system, bringing more firms access to it, and with increased interoperability and functionality.
The new system is expected to become operational in 2022. Earlier this month, Bank of England Governor Andrew Baily said that the regulator is now assessing the pros and cons of issuing a government cryptocurrency. In addition, the Central Bank stated that the design principles of the state cryptocurrency are more important than the underlying technology, and that private cryptocurrencies may be useful in the future.