Britain’s largest banks have completed the world’s first interbank transactions using tokenized deposits marking a step toward using on-chain commercial bank money for payments and settlement.
Lloyds Banking Group,
NatWest, and
Barclays
completed two remortgage transactions using tokenized sterling deposits while a separate group of three banks, including HSBC, carried out a simulated customer-to-customer payment designed to replicate an online marketplace purchase, UK Finance said.
The transactions were conducted under the Great British Tokenised Deposit (GBTD) project, an initiative involving
Barclays,
HSBC UK,
Lloyds, Monzo,
Nationwide,
NatWest, and
Santander.
The shared infrastructure was developed by blockchain technology company, Quant.
Tokenized deposits are digital representations of commercial bank money held in conventional accounts. Unlike privately issued stablecoins, they remain liabilities of regulated banks and retain the legal and regulatory protections associated with bank deposits.
EXPERT OPINION | ‘Tokenized Deposits Are Probably Going to Take Over from Stablecoins 5 Years from Now,’ Says Bank of England Policymaker
The trials tested the ability to move bank money between institutions while allowing payments to be programmed around specific conditions.
In the re-mortgage transactions, funds were automatically released once the property transaction was completed. In the simulated online purchase, money was held in the buyer’s account and released to the seller after delivery was confirmed, although no real goods changed hands.
Banks and financial institutions have spent years experimenting with on-chain representations of deposits, securities, and currencies. But systems developed independently by individual banks have historically made it difficult for tokenized assets to move between institutions.
The GBTD project is intended to address that interoperability problem by creating shared infrastructure for tokenized commercial bank money.
The initiative also aligns with the Bank of England’s preference for regulated bank-based forms of digital money. The central bank has expressed concerns that widespread use of privately-issued stablecoins could shift deposits away from commercial banks potentially affecting bank funding and the wider financial system.
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UK Finance said the project will now move toward establishing a company, rulebook, and governance framework to support a transition from the pilot to full production.
The participating banks also plan to issue three digital bonds in the first quarter of 2027 that can be traded and settled using tokenized deposits extending the technology from payments into digital-asset settlement.
The development comes as banks in other major markets pursue similar infrastructure. Canada’s six largest banks are exploring a shared Canadian-dollar tokenized deposit system, while U.S. financial institutions are developing their own interbank tokenized-deposit networks.
INSTITUTIONAL | Canada Big Six Banks Explore Tokenized Canadian-Dollar Deposits
The development also comes the same week after the European Central Bank (ECB) launched Pontes, an on-chain institutional settlement system for tokenised assets allowing wholesale transactions in tokenised financial assets to be settled using central bank money.
The launch marked a major step in the Eurosystem’s plans to integrate distributed-ledger technology into European financial markets.
INTRODUCING | The European Central Bank (ECB) Launches On-Chain Institutional Settlement System for Tokenised Assets
Stay tuned to BitKE on tokenization developments globally.
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