The largest banks in Britain have completed their first interbank transfers using tokenised deposits, moving blockchain-based bank money closer to viable deployment as a settlement method for tokenised assets. The transactions mark progress toward an alternative approach to stablecoins for digital asset settlement.
The transfers were conducted under the Great British Tokenised Deposit project led by UK Finance. Lloyds Banking Group, NatWest, and Barclays executed two remortgage transactions, while HSBC, Lloyds, and NatWest completed a customer-to-customer payment simulating an online marketplace purchase. In the marketplace payment test, programmable deposits held buyer funds and released them only after goods were delivered, demonstrating potential applications in fraud reduction and cross-bank transactions.
The pilot involves seven participating banks: Barclays, HSBC, Lloyds, Monzo, NatWest, Nationwide, and Santander, with support from Quant, EY, and Linklaters. The project covers three use cases: marketplace payments, remortgaging, and digital asset settlement.
Tokenised Deposits vs. Stablecoins
Tokenised deposits and stablecoins represent fundamentally different approaches to digital money. According to the IMF, tokenised deposits are bank liabilities transferred on blockchain or distributed-ledger technology, with the underlying nature of the deposit unchanged despite the technology shift. Stablecoins, by contrast, are separate liabilities issued by private companies and based on reserve assets.
The Bank of England has indicated a preference for banks issuing tokenised deposits rather than relying on privately-issued stablecoins. The Bank for International Settlements has argued that tokenised deposits align more closely with the current two-tier monetary system.
Bank of England Governor Andrew Bailey has framed tokenisation as a means of modernising existing money forms rather than replacing them entirely. Deputy Governor Sarah Breeden has proposed a "multi-money" system in which conventional deposits, tokenised deposits, and regulated systemic stablecoins could coexist and convert at par value.
Global Momentum
Similar initiatives are underway in other jurisdictions. In June, major US banks backed an on-chain money network operated by The Clearing House, designed to connect tokenised commercial-bank money with existing payment infrastructure including RTP and CHIPS. Canada's Big Six banks are developing a tokenised Canadian-dollar deposit rail. SWIFT has announced 17 banks across six continents lined up for tokenised cross-border payment trials.
Market Scale
The potential settlement volume is substantial. Citi Institute projects tokenised financial assets could reach $5.5 trillion by 2030 in its base case and $8.2 trillion in a bull case scenario, compared with a $1.9 trillion stablecoin base case. McKinsey estimates major global banks already move more than $4 trillion annually through tokenised-deposit infrastructure. Real-world-asset AUM on-chain stood at $34.18 billion as of September 15, up 85.2% year to date, though only approximately 12% of tracked tokenised capital is actively deployed in liquidity, lending, or collateral markets.
UK participants are preparing three digital bonds for the first quarter of 2027 that could trade and settle using tokenised deposits.
