Britain's largest banks make first interbank transactions using tokenised deposits
Britain's largest banks have completed 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 that the Bank of England favours over privately issued stablecoins.
For the first time, the largest banks in Britain have completed interbank transactions using tokenized deposits, according to industry body UK Finance. Lloyds, NatWest and Barclays executed two remortgage transactions, while HSBC participated in a customer-to-customer payment simulation, mimicking an online marketplace purchase. Tokenized deposits are regular bank deposits recorded on a blockchain, retaining their legal status and protections while enabling instantaneous settlement and conditional execution.
The trials illustrated how these transactions work in practice. In the remortgages, funds were automatically released between banks once the property transfer was confirmed. In the marketplace test, the buyer's money remained locked until delivery was verified, though no actual goods changed hands. The significance lies in the interbank aspect - banks have been experimenting with blockchain for over a decade, yet each developed its own system, hindering interbank transactions.
The pilot, known as the Great British Tokenized Deposit project, launched last year, connects these banks.
Barclays, HSBC, Lloyds, Monzo, NatWest, Nationwide and Santander are participating, with the Bank of England supporting the initiative over stablecoins, which are crypto tokens normally pegged to the US dollar and issued by private companies outside the banking system. The participating lenders now aim to form a company and establish a governing rulebook, with plans to issue three digital bonds in Q1 2027 that would be traded and settled using tokenized deposits.
This milestone in the UK underscores a broader trend in Europe, where central banks and regulated banks are being favored over privately issued stablecoins. While London and Frankfurt are adopting distinct approaches, both are optimistic that the future of tokenized finance should be based on familiar forms of money rather than tokens controlled by crypto firms.
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