The world’s financial plumbing is being rebuilt. As money and assets move onto shared, programmable ledgers, one leading question sits above the rest: can the safest settlement asset of all – central bank money – work on infrastructure that no single institution controls? Last September and October the Digital Trust Centre of Excellence helped the Bank of England explore exactly that, and its report was published this May.

We were one of nine teams in the Bank of England’s DLT Innovation Challenge, run in collaboration with the Bank for International Settlements Innovation Hub London Centre. The premise was deliberately hard: can wholesale central bank money be transacted and settled on an external programmable ledger the Bank does not control, and “where trust is not inherent”? Across roughly two months of weekly technical deep dives, leading up to an in-person showcase in the City of London in October 2025, participants stress-tested the idea with the Bank’s economists and technologists.

Why this matters

This isn’t a niche engineering exercise. How central banks settle in a tokenised world will shape global finance for a generation: it drives how banks hold and move money, how assets are issued and serviced, and in which entities and locations that work is done. The Bank’s task is to keep the financial system stable and free of systemic risk while actively encouraging innovation – and the risk is real, because poorly designed adoption could halt or distort markets that move trillions. Get the design right, and financial centres such as London, Edinburgh and Glasgow will prosper in the next generation of settlement, custody and tokenised asset-servicing business models.

The Challenge examined four questions that define the problem:

• Settlement finality and security: can a completed transaction be trusted as irreversible?
• Scalability: can a system handle volumes that, in an age of AI-driven activity, will only grow?
• Network and asset control: how do you govern a decentralised system?
• Interoperability: no single ledger will serve every market and asset.

The prize? Atomic settlement – where both legs of a trade either succeed together, or not at all.

What the Bank concluded

The Bank published its final report on 12 May 2026, with a foreword by Deputy Governor for Financial Stability Sarah Breeden. The message is encouraging: the technology works, and participants demonstrated secure, scalable and interoperable designs for settling on distributed ledgers. The report is clear that there is “no single path forward”, but that reflects a rich design space – faster finality, greater decentralisation and tighter control, each pulling in a different direction. The task now is to choose the right combination for wholesale settlement. Following the Challenge, which focused on technical finality, the Bank, the FCA and international institutions continue to drive legal and regulatory clarity through pilots, sandboxes and consultations.

What the Digital Trust Centre of Excellence contributed

The Centre convened a partnership bid. Much of the core engineering was led by Nethermind – a firm born in the web3 world and now bringing that expertise into institutional finance – through Professor John Church and his team, working with Professor Bill Buchanan and Peter Ferry of the Centre, and Scottish SME TrackGenesis. We were in formidable company; the handful of participants in the Challenge included HSBC and Circle.

The core technical problem is easy to state and hard to solve. How do you keep the credible neutrality of a decentralised ledger – with no single party in charge – while delivering the speed and certainty that, today, only a centralised operator such as a central bank’s own ledger can provide?

Our answer was a design where those two things finally coexist. Final settlement is anchored to a public ledger, so there is no single operator who can halt or re-order the market. A permissioned group of ‘pre-confirmers’ (banks, and potentially the central bank itself) give near-instant confirmation, backed by funds they stake and forfeit if they fail to honour it. And every batch of transactions carries a zero-knowledge proof: cryptographic evidence that it was processed correctly, with no need to trust the operator. The result aims for the speed and certainty of the Bank’s real-time gross settlement service together with the resilience of a public ledger – without the single point of control. We felt this was the best compromise between decentralisation, deterministic finality and enforceable governance.

We are clear-eyed about the limits. As the Bank’s report notes, zero-knowledge rollups can improve throughput but their finality remains bound by the underlying network, and the law has not yet caught up with the distinction between technical and legal finality. Our view is that settlement of central bank money on a public ledger is possible and will, in time, be given a clear legal basis. For now, the Bank’s preference is to synchronise its existing systems with new ledgers, and on 19 May 2026 Deputy Governor Breeden challenged the industry to move “from pilots to production”. That is exactly the contribution Scotland intends to make.

Scotland’s place in this

Working shoulder to shoulder with our central bankers on the hardest question in settlement is why the Digital Trust Centre of Excellence exists: to bring industry, academia and the public sector together so Scotland helps build the financial system of the future, rather than watch it being built elsewhere. The Challenge is one of several fronts – alongside our sandbox and Innovation Challenge Calls – where we put Scotland’s research base and financial-services strength to work at the frontier of digital trust.