The U.K.’s central bank digital currency (CBDC) project has successfully passed the proof-of-concept stage, and the country’s authorities are ready to begin piloting the digital pound using the Regulated Liabilities Network (RLN) infrastructure.
According to a recent report by UK Finance, the trade association for the British banking and financial services sector, the digital pound pilot has successfully passed the proof-of-concept phase.
The first phase tested the CBDC concept across three potential use cases:
- consumer domestic payments;
- wholesale cross-border payments;
- securities settlement.
The report states that the Regulated Liability Network (RLN) was used to validate the concept by testing various domestic payment options in a ring-fenced environment. This approach allowed it to prove that there are benefits to using the RLN in the pilot of the future CBDC, and in particular it:
- helps ensure consistency between the CBDC and commercial bank money, thereby maintaining currency unity;
- reduces the risk of fraud in authorized funds transfer payments;
- gives consumers greater control over funds in the event of default by the transfer recipient;
- speeds up the settlement process.
The report suggests that U.K. authorities are ready to move to the next stage of testing the CBDC concept and begin pilot trials of a retail central bank digital currency. As part of future trials, the RLN will use its own token for settlement and thus hold tokenized regulated money and digital assets in the same ledger. The tokenized liabilities will remain a requirement for the issuer and not the RLN.
The report also states that the RLN doesn’t necessarily need to have a structure built on distributed ledger technology (DLT) to achieve the government’s required objectives. And the digital pound will be tested in five different technology options of the RLN architecture, including centralized infrastructure.
The Bank of England (BoE) has successfully completed Project Rosalind, proving the potential of Britcoin as a means of reducing the cost of person-to-person payments and has also begun work on a wallet for the CBDC.
