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Bank of England boosts payments competition with new account

FILE PHOTO: A general view of the Bank of England in the City of London financial district, London, Britain

LONDON (Reuters) – The Bank of England gave the green light on Monday to a new type of account at the central bank to bolster Britain’s credentials in financial innovation and open up payments to more competition.

The BoE said it would offer an “omnibus” account to cater for a wider range of anticipated payments systems, such as those based on distributed ledger technology (DLT) or blockchain, the technology which underpins crypto-assets like bitcoin.

“Under the new model, an operator of a payment system can hold funds in the omnibus account to fund their participants’ balances with central bank money,” the BoE said in a statement.

“This will allow them to offer innovative payment services, while having the security of central bank money settlement.”

A central bank account means less credit risk as potential defaults from many intermediaries will be stripped out.

Fnality, which is backed by 15 banks, said on Monday it has submitted an application to the BoE to become the operator of an omnibus account for its planned DLT-based payment system.

“This is huge for the sector,” Fnality CEO Rhomaios Ram said of the BoE announcement, adding it was a sign that authorities were becoming more comfortable with blockchain-type innovation.

“The big question before was are the authorities even going to allow something like this to happen.”

Money in the omnibus account would be owned by participants on Fnality’s platform, which include Barclays, Credit Suisse, Lloyds, UBS and Santander. They would exchange stocks, bonds, derivatives and other assets directly with each other on a wholesale basis.

The change of ownership in the assets would be recorded on Fnality’s DLT accounting system without the need to go through many intermediaries, thereby saving on time and cost, while the money stayed in the omnibus account.

“This is uncharted territory for the BoE,” Ram said in response to when he could expect to receive approval for the omnibus account.

(Reporting by Huw Jones; Editing by Paul Simao)

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