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UK to test Regulated Liability Network concept for retail payments

The UK is to push ahead with a proof-of-concept on the development of a Regulated Liability Network, a financial market infrastructure for programmable money operating on a multi-bank shared ledger.

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UK to test Regulated Liability Network concept for retail payments

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The move to expand the programme follows an earlier pilot in 2022 conducted by EY and a subsequent 'Discovery Phase' held  in consultation with market participants, including Barclays, Lloyds, HSBC, Santander and Visa.

It follows a recent PoC run by the Federal Reserve with a clutch of top banks that demonstrated the feasibility of an interoperable network for wholesale payments operating on a shared multi-entity distributed ledger.

While the UK Discovery Phase explored the delivery of a RLN for wholesale paymnts, the PoC will track the retail consumer market. This would test the use case for a RLN that would provide commercial bank money with the equivalent programmability of a future digital pound, in this way ensuring competitive consistency in the event of a full scale CBDC roll out.

The importance of this was emphasised in a speech given in July by Bank of England governor Andrew Bailey, who stated: "We want to encourage more thinking and action in the world of enhanced digital bank deposits - sometimes call tokenised deposits. So, yes, this is a call to action particularly to banks - don’t leave central banks as the only show in town."

With a proof-of-concept on the horizon, UK Finance has issued a call for participants to join the programme: "If you think this work could be of interest, please reach out to Rhiannon.Butterfield@ukfinance.org.uk so you can be included in initial dialogue and judge whether you would like to be a participant for the next phase."

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