Leading British banks have successfully carried out the initial interbank transfers using tokenised deposits, executing blockchain-based money movements within the traditional banking network instead of relying on stablecoins.
Barclays, Lloyds, and NatWest executed a pair of mortgage transactions, while a distinct consortium of lenders evaluated a simulated marketplace transaction. This experiment, which forms part of UK Finance’s Great British Tokenised Deposit initiative, reinforces the Bank of England’s (BoE) favor for bank-created tokens over privately backed stablecoins.
Why Tokenised Deposits, Not Stablecoins
While stablecoins are generally managed by private entities outside the banking ecosystem, tokenised deposits function as standard bank funds translated into blockchain tokens, maintaining the identical legal framework as existing account balances.
Andrew Bailey, the BoE Governor, previously cautioned that stablecoins issued by banks could undermine financial stability, steering financial institutions toward tokenised deposits. Furthermore, the central bank maintained a restriction on issuance limits while loosening other regulatory constraints this year.
How the Pilot Worked
According to UK Finance, HSBC alongside two additional financial institutions also executed a peer-to-peer transaction simulating an e-commerce marketplace purchase. In this scenario, programmable deposits secured the purchaser’s capital until delivery of the items was verified.
The managing director for Payments and Innovation at UK Finance, Jana Mackintosh, noted that this arrangement has the potential to minimize fraud exposure. She also pointed out that international interest has intensified.
“In the last 12 months, other jurisdictions have been speaking to us in earnest about what we’ve done, trying to understand how they can now catch up.”
— Mackintosh
The initiative is advancing toward the establishment of a formal entity and an oversight rulebook. The participating banks intend to release three digital bonds during the first quarter of 2027, which will be exchanged and settled via tokenised deposits.
This initiative is part of a wider UK push toward institutional tokenisation that has engaged both banks and asset managers. Across the Atlantic, the banking association and payments firm The Clearing House revealed its own tokenised deposit interbank initiative back in June.
The persistence of the UK’s early advantage hinges on the speed at which the governance framework and the planned 2027 bond rollouts are successfully delivered.
Frequently Asked Questions
What are tokenised deposits?
Tokenised deposits are traditional bank deposits translated into blockchain tokens that hold the exact same legal status as regular funds in a bank account.
How do tokenised deposits differ from stablecoins?
Unlike tokenised deposits—which remain liabilities on a bank’s balance sheet within the standard financial system—stablecoins are typically issued by private companies and operate outside of traditional banking structures.
Which banks participated in the UK trial?
The trial involved major institutions including Lloyds, NatWest, Barclays, and HSBC.
What are the next steps for the Great British Tokenised Deposit project?
The project is moving toward creating a governing rulebook and establishing a formal company, with participating lenders aiming to issue three digital bonds settled through tokenised deposits in the first quarter of 2027.
