Bank of England official: Distributed ledgers are good, but there are still many problems

The Bank of England (BoE) has been aggressive in exploring blockchain and distributed ledger technology, but at least one official at the bank doesn’t think the technology will become popular anytime soon.

Andrew Hauser, executive director for banking, payments and financial resilience at the Bank of England, made this point as he reviewed the development of the central bank’s settlement systems over the past 20 years. Hauser made the speech at the CREST 20th anniversary conference, which was held to mark the founding of the UK Securities Depository.

The move comes about a week after the central bank published a consultation paper on next-generation settlement services and the role blockchain could play in them. The central bank has spent months researching an internally issued digital currency and recently formed a fintech accelerator to further advance advanced technologies such as blockchain.

Hauser said financial technology could reshape the central bank system, with distributed ledgers being the most prominent. But he was more conservative about when the technology would become widely available.

Hauser said at the conference:

There is no evidence that such radical reforms will happen any time soon: there is still much work to do, as a large number of issues have not been properly addressed, including: speed and scalability; privacy protection; public protocol writing; cash and securities integration; and the establishment of regulatory and legal norms .

He said that in certain areas, “some rudimentary but potentially transformative” use cases are more likely to succeed, such as improving market architecture.

He also said that financial institutions researching blockchain technology must decide whether to "fight alone" or "attack together", with the R3 distributed ledger consortium being the best example. But he added:

There are risks in either choice.