Stories
UK Banks Pioneer Tokenised Deposits for Interbank Transactions, Eyeing Safer Finance
- •UK banks, including Lloyds, NatWest, and Barclays, have completed the world's first interbank transactions using tokenised deposits, a blockchain-based form of commercial bank money.
- •The trials, part of the "Great British Tokenised Deposit" project by UK Finance, involved mortgage transactions and a simulated online marketplace purchase.
- •Tokenised deposits offer a potentially cheaper and more efficient alternative to existing systems and are seen by the Bank of England as preferable to stablecoins.
- •The technology demonstrated its ability to lower fraud risks in a simulated online purchase by setting aside funds until goods were received.
- •The project plans to establish a company, develop a rulebook, and issue three digital bonds in Q1 2027 that can be traded and settled with tokenised deposits.
Key Questions Answered
Tokenised deposits are crypto tokens representing commercial bank money that have the same legal status as regular bank account funds. Lloyds, NatWest, and Barclays carried out two mortgage transactions using tokenised deposits, while a trio of banks including HSBC ran a simulated online marketplace purchase as part of the UK Finance project.
Tokenised deposits share the same legal status as money deposited in a traditional bank account. In contrast, stablecoins are typically issued by private companies and draw money out of the banking system, which raises concerns regarding monetary sovereignty and the overall cost of credit.
The project plans to establish a company along with a governing framework and rulebook to transition from a pilot phase into full production. Furthermore, the participating banks intend to issue three digital bonds in the first quarter of 2027 that can be settled and traded using tokenised deposits.
