The Bank of England and Bank for International Settlements (BIS) have completed a joint pilot testing a distributed ledger technology-based settlements system between institutions.
The UK central bank plans to take lessons from the project and apply them to its real-time gross settlement (RTGS) system.
BIS has also published a 44-page report on the project. Titled Project Meridian, it was carried out with the Bank of England at the BIS innovation hub in London.
The document says the banks were able to buy houses in England and Wales via a synchronisation network that utilises distributed ledger technology (DLT).
According to the report, the method of sending messages between the synchronisation network and RTGS system could be extended to other asset classes “relatively easily”.
The report is also clear that this settlement system could benefit central bank digital currencies (CBDCs), stating that:
“Synchronisation can provide a catalyst for innovation in wholesale payments and support the emergence of new payments infrastructures that settle using central bank money.”
Project Meridian does outline a number of potential issues in using such a system, however. The document specifies the difficulties network operators would face in implementing identity verification.
It also highlights that synchronisation services would only be available during RTGS service hours.
There is also a host of legal issues, such as where the final point of irrevocability of the settlement would be drawn and how to digitally represent asset ownership.
In March this year, the BIS announced it had completed Project Icebreaker, another pilot looking at international retail and remittance use cases for CBDCs.
The project saw participation from the central banks of Norway, Sweden, and Israel.
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