Working with PwC, the Bank of England is testing blockchain applications and their potential for working more closely with FinTechs.
Client: Bank of England
Our Role: PwC designed and developed a “proof of concept” gross settlement application using blockchain technology to demonstrate the feasibility of DLT (distributed ledger technology) to senior bank management.
Industry: Financial Services
Services: Technology, Blockchain
PwC is at the forefront of developing real-world applications for blockchain, the distributed, tamperproof ledgers that promise to cut out unnecessary intermediaries, reduce costs, and increase security for a variety of business transactions. Blockchain can also offer greater transparency and traceability for many business processes. But despite its many uses, blockchain is also a paradox: The technology is designed to foster trust, but companies may face doubts about its reliability and security. This is the challenge that both PwC and clients must address to realize blockchain’s potential and benefits.
The Bank of England, a central bank whose mission is to ensure monetary and financial stability in the UK, wanted to better understand the potential use of blockchain in the area of gross settlement, the system used to process payments in real-time for banks. It needed to prove the technology’s workability to senior bank management, and to explore how the central bank could use its FinTech Accelerator, a project to work with FinTech companies to explore applications that use new technology, to better address some of the central bank’s unique challenges. For example, today the Bank of England’s infrastructure is a single point of failure in the UK banking settlement process. The distributed nature of a blockchain-based system would build resilience into the platform. Additionally, a blockchain platform would give the Bank of England visibility into all payment systems transactions, without relying on banks providing reports.
“This Proof of Concept brought to life the core features of distributed ledger technology (DLT), greatly enhancing the Bank’s understanding of DLT. With PwC’s support, the Bank’s developers used the latest techniques and software to deliver this POC and have gained further skills that will enable additional rapid Proof of Concepts in the future.”
PwC used Ethereum, an open-source, public, blockchain-based distributed computing platform and operating system that can verify smart contracts electronically, in a proof of concept (POC) project to test how this might work in practice. The goal was to build a platform that allowed multiple parties to each run a blockchain node to process different kinds of smart, gross settlement contracts. The POC included having multiple parties on the chain and multiple scenarios that mimicked real-world value transfers and gross settlement.
As part of the project, the team rigorously tested the POC’s integrity, resilience and capability to add features to smart contracts. PwC also paired its programming teams with Bank of England team members to work together and share critical knowledge and skills.
The Ethereum development took just six weeks in PwC’s blockchain labs and helped demonstrate to senior bank management the viability and resiliency benefits and the practical limitations of the technology. It also gave the Bank of England the confidence to introduce blockchain as part of its FinTech Accelerator, a project that works with FinTech firms to introduce new technology into the financial ecosystem.
“This is a significant piece of work and PwC is very excited to have been able to support the Bank in developing its first DLT Proof of Concept, which will enable the Bank to gain a better awareness of DL from both a technology and policy perspective.”
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Senior Development Manager , PwC Hong Kong, PwC United Kingdom
+44(0)78 433 32 956