Seven major UK banks have completed the first live customer transactions using tokenized sterling deposits on shared infrastructure. Participants include Barclays, HSBC UK, Lloyds Banking Group, Monzo, Nationwide, NatWest, and Santander.
The pilot is testing real commercial use cases, including person-to-person transfers and remortgage transactions. UK Finance indicated that digital-asset settlement will also be tested in the coming months.
Tokenized Deposits Retain Bank Protections
A tokenized deposit is distinct from both privately issued stablecoins and a digital pound from the Bank of England. Instead, it represents a digital version of money already held as a commercial-bank deposit.
The approach aims to preserve the legal and regulatory protections attached to ordinary bank money while adding blockchain-style programmability and faster settlement capabilities.
Focus on Interoperability
Individual banks can build tokenized deposit systems relatively easily. The significant challenge lies in creating interoperability—enabling deposits issued by one institution to move across common infrastructure without compromising the protections and controls inherent to the banking system.
This pilot demonstrates a contrasting approach to stablecoins. While stablecoin companies work to make blockchain-based dollars resemble regulated bank money, banks are advancing the opposite direction by giving regulated deposits the programmability of blockchain assets.
Quant built the platform, with EY providing project management and Linklaters developing legal guidance and rulebooks.
