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The Bank of England has found that distributed ledger technology could improve aspects of wholesale payments and settlement, but only at the cost of significant trade-offs in governance, resilience and scalability.
BofE warns DLT is no simple answer
The findings follow the DLT Innovation Challenge, a joint project between the Bank of England and the BIS Innovation Hub London Centre.
The initiative brought together financial institutions, technology providers and academic specialists to test how DLT might support settlement finality, scalability, asset control and interoperability with both blockchain-based and traditional systems, including real-time gross settlement infrastructure.
Speed gains come with new risk assumptions
The trials showed that different DLT designs can accelerate settlement finality. However, the Bank concluded that no single model currently delivers fast, deterministic finality without altering underlying assumptions about trust, risk or control.
That conclusion is important for wholesale finance, where settlement systems must meet high standards of certainty, resilience and legal finality. In practice, improving speed may create new dependencies elsewhere in the system, particularly around validation, governance or operational safeguards.
Scalability presented a similar dilemma. DLT platforms can increase throughput and reduce latency, but those benefits may introduce greater technical complexity. The Bank said scalability cannot be assessed separately from questions of control and resilience.
Interoperability remains a difficult obstacle
The Challenge also highlighted the difficulty of connecting DLT platforms with other distributed ledgers and existing financial market infrastructure. Interoperability can support broader adoption, but it may shift trust and operational dependencies rather than remove them.
This is especially relevant as policymakers and market participants consider whether future settlement networks should rely on native integration, third-party bridges or hybrid models linking tokenised assets with conventional payment rails.
Digital market infrastructure still needs hard choices
Sarah Breedon, the Bank’s deputy governor for financial stability, said DLT is evolving rapidly and that collaboration between authorities, market participants and technology providers is essential.
The Bank’s message is cautious rather than dismissive. DLT may yet play a role in digitalising financial markets, but the technology does not eliminate core settlement challenges. Instead, it reframes them. For wholesale payments, the question is no longer whether DLT can wor
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