On October 6, 2017, Andrew Hauser, executive director for banking payments and financial resilience for the Bank of England (BoE), remarked on a FinTech accelerator that the central bank launched in June 2016.
According to Hauser, the accelerator was endeavored upon with two main objectives. The bank sought primarily to improve general familiarity with products in the FinTech ecosystem in order to better assess their strengths, weaknesses, and marketplace applications. The secondary objective was to provide insight to firms regarding possible regulatory, policy, and operational implications of technologies that are rising in popularity, such as distributed ledger technology (DLT).
Hauser affirmed how the merits of DLT can be applied to banking systems.
"DLT has in many respects been the poster-child for FinTech. Thrown into prominence by the advent of bitcoin and other cryptocurrencies, the attraction of DLT to central banks really lies in the potentially highly attractive resilience characteristics of the underlying technology," explained Hauser. "In its purest form, a DLT network operates with no centre, and every node in the network holds a full copy of the ledger. So the failure of a node has no impact on the overall resilience of the system, with transactions simply rerouting elsewhere."
Hauser went on to say that valuable connections made by the BoE in the FinTech sector are a result of the accelerator and BoE's broader field work.
He described how research has impacted BoE's understanding.
"Our work on DLT has helped us start to think through how the financial networks of the future may be able to operate in safer and more efficient ways … Our work on data analysis has thrown light on how we can manage ever larger data sets to monitor the economy and the financial system in real time and draw out patterns that might help us set better policy or spot the next crisis coming before it happens. And our work on machine learning has helped us take the first baby steps towards engaging with that data in a more interactive way, putting computers alongside our staff to help them form the judgments on which monetary and financial stability depend."
In May of 2017, the BoE said DLT lacked the maturity necessary to manage payments. However, BoE also recently celebrated 20 years of independence in monetary policy, during which, International Monetary Fund (IMF) Managing Director Christine Lagarde extolled the virtues of new technology, even hinting that Special Drawing Rights, the in-house IMF money that is backed by an average of various other currencies, might one day encompass cryptocurrencies. The recent findings of the accelerator, coupled with IMF sentiment, might be the preface of a pivotal stance by the BoE regarding the application of DLT or other technologies, such as blockchain.