A new paper published by the Bank Of England suggests it’s got its eye on blockchain regulation…
The Bank Of England appears to have a love/hate relationship with cryptocurrencies and blockchain technology. With regards currencies, the Bank’s governor, Mark Carney, expressed his concerns in a speech at the start of last month. It subsequently announced its plans to hold cryptocurrencies to account, with Carney describing them as “proving poor short-term stores of value”.
Fast forward to today, and the Bank Of England has now published a new paper entitled ‘Fintech Proof of Concept’, with the aim of “exploring how distributed ledgers can be configured to enable privacy amongst participants whilst keeping data shared across a network”.
It’s partnered with a blockchain startup called Chain on the project, and the Proof of Concept document is described as “an academic, rather than a practical, exercise”. The document describes trying to keep data privacy at an appropriate rate across a distributed network, but also allowing oversight for regulation.
It does lean towards a preferred approach, although not one without challenges of its own.
“It appears theoretically possible to configure a distributed ledger system in such a way that transactions remain private whilst keeping all data shared across the network, and at the same time maintaining a regulatory view of all transactions”, it explained. “However, the trade-offs would still need to be further explored, especially with respect to scalability, speed of transaction processing and risks around the security of the cryptographic techniques employed”.
Understandably, the words ‘regulatory view’ stand out, as the Bank continues to explore how it can have oversight over evolving technology that has privacy at its heart.
You can read the paper for yourself, here.