UK Banks Complete First Interbank Transactions Using Tokenised Deposits
Britain’s largest banks executed what the industry describes as the first transactions anywhere using tokenised deposits to move money between one another, a milestone for a blockchain-based form of bank money. Lloyds, NatWest, Barclays, and HSBC completed trials moving funds via blockchain, part of the “Great British Tokenised Deposit” project run by UK Finance. The effort marks a critical shift toward digital ledger technology in mainstream banking.
Trials Show Instant Settlements via Blockchain
The “Great British Tokenised Deposit” project saw Lloyds, NatWest, and Barclays process two remortgage transactions using blockchain-recorded deposits. HSBC, meanwhile, was part of a group of three banks that ran a customer-to-customer payment simulating an online marketplace purchase. These tests revealed how tokenised deposits—normal bank deposits recorded on a blockchain rather than on a bank’s internal ledger—can settle instantly and be programmed to move only when certain conditions are met. Jana Mackintosh, UK Finance’s managing director for Payments and Innovation, said the technology could lower fraud risks.
Bank of England Prioritizes Bank-Issued Tokens Over Stablecoins
The Bank of England has said it would rather banks innovate with tokenised deposits than with stablecoins, which are crypto tokens usually pegged to the US dollar and issued by private companies outside the banking system. Tokenised deposits have the same legal status as money deposited in a bank account, whereas stablecoins are typically issued by a private company and take money out of the banking system. The Eurosystem launched Pontes, allowing banks to settle trades in tokenised assets using central bank money, with 13 institutions ready to use it immediately.
UK Banks Plan Digital Bonds by 2027, Spark Global Interest
Participating lenders now plan to set up a company and a governing rulebook, and aim to issue three digital bonds in the first quarter of 2027 that would be traded and settled using tokenised deposits. The move follows European developments, including Europe’s central banks publishing their response to the review of the EU’s crypto rulebook, MiCA, calling for a wider ban on interest payments on stablecoins and new powers to curb tokens pegged to foreign currencies. UK Finance reported that global counterparts are monitoring the project. “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 said. In the United States, The Clearing House, a banking association and payments company, announced an interbank tokenised deposit project in June.
Blockchain’s Challenge: Scaling Beyond Experiments
The trials address a past issue where each bank built its own system, leaving them unable to transact with one another. The pilot, launched last year, links them together. As the UK positions itself in tokenised finance, the success of this pilot could influence global efforts. The next phase will test whether blockchain can scale beyond experiments, reshaping money’s movement across borders and institutions.
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