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Pounds held in ordinary bank accounts have moved between rival lenders on blockchain rails for the first time.
Lloyds, NatWest and Barclays carried out two remortgage transactions using tokenised deposits, while a group of three banks including HSBC ran a customer-to-customer payment simulating an online marketplace purchase, industry body UK Finance announced on Thursday.
A tokenised deposit is a normal bank deposit recorded on a blockchain rather than on a bank’s internal ledger. It keeps the same legal status and protections as money already sitting in an account, but can settle instantly and be programmed to move only when certain conditions are met.
The trials showed how that works in practice.
In the remortgages, funds were released between banks automatically once the property transfer was confirmed. In the marketplace test, the buyer’s money was held and paid to the seller only after delivery was verified, though no real goods changed hands.
The significance lies in the word interbank.
Banks have experimented with blockchain for more than a decade, but each built its own system, leaving them unable to transact with one another. The pilot, known as the “Great British Tokenised Deposit” project and launched last year, links them together.
Barclays, HSBC, Lloyds, Monzo, NatWest, Nationwide and Santander are all taking part as it also carries official backing.
The Bank of England has said it would rather banks innovate with tokenised deposits than with stablecoins, which are crypto tokens usually pegged to the US dollar and issued by private companies outside the banking system.
Participating lenders now plan to set up a company and a governing rulebook, and aim to issue three digital bonds in the first quarter of 2027 that would be traded and settled using tokenised deposits.
A week of major developments for tokenisation in Europe
The UK milestone caps a week in which Europe’s approach to digital money has come into sharper focus.
On Monday, the Eurosystem launched Pontes, allowing banks to settle trades in tokenised assets using central bank money, with 13 institutions ready to use it immediately.
The ECB also said it would invest some of its own funds in tokenised securities through this new system.
A day later, Europe’s central banks published their response to the review of the EU’s crypto rulebook, MiCA, calling for a wider ban on interest payments on stablecoins and new powers to curb tokens pegged to foreign currencies such as the US dollar.
The common thread is a preference for money issued by regulated banks and central banks over privately issued stablecoins.
London and Frankfurt are pursuing different tools, but both are betting that the future of tokenised finance should run on familiar forms of money rather than on tokens controlled by crypto firms.