Some of Britain’s largest banks have completed what industry group UK Finance describes as the world’s first interbank transactions using tokenised deposits, demonstrating that blockchain-based commercial bank money can move between separate banking institutions rather than remaining confined to individual banks’ systems.
Lloyds, NatWest and Barclays completed two mortgage transactions using tokenised deposits, while another group of three banks including HSBC conducted a person-to-person transaction simulating a purchase through an online marketplace, UK Finance told Reuters.
The transactions form part of the Great British Tokenised Deposit, or GBTD, project, involving Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide and Santander. Quant provides the underlying programmable-money infrastructure, with EY and Linklaters also supporting the initiative.
The breakthrough is interoperability. Banks have previously developed their own tokenised-deposit systems, but those systems largely operated within individual institutions. The UK initiative is testing whether digital representations of conventional bank deposits can operate across banks while retaining the legal and regulatory characteristics of commercial bank money.
Mortgages and Marketplace Payments Put Programmability to Work
The tests demonstrate why tokenised deposits potentially offer more than simply faster bank transfers.
In the simulated marketplace purchase, money was reserved in the buyer’s account and programmed to be released to the seller only after the goods were received. No physical goods actually changed hands during the test, but the transaction demonstrated how programmable bank money could potentially reduce fraud by linking payment directly to completion of an agreed condition.
The two remortgage transactions applied similar technology to property settlement. Funds could remain locked until the property transaction was completed and then be released automatically.
That could reduce the number of separate systems, intermediaries and manual processes involved in complex transactions.
Tokenised deposits differ fundamentally from most stablecoins. They represent existing commercial bank deposits rather than separate digital tokens backed by reserve portfolios. A customer therefore retains a claim against their bank while the deposit gains blockchain-based capabilities including programmability and potentially faster settlement.
Earlier this year, Lloyds separately issued tokenised sterling deposits on the Canton Network and used them to purchase a tokenised UK government bond from Archax. Lloyds described that January transaction as the UK’s first use of tokenised deposits on a public blockchain and the first issuance of sterling deposits in that form globally.
Britain Builds a Bank-Based Alternative to Stablecoins
The distinction between stablecoins and tokenised deposits is becoming increasingly important for UK policymakers.
The Bank of England has encouraged commercial banks to experiment with tokenised deposits, which keep money within the regulated banking system, while taking a more cautious approach toward systemic stablecoins. Policymakers have raised concerns that widespread migration from deposits into privately issued stablecoins could affect bank funding, credit provision and monetary sovereignty.
The GBTD project is now moving beyond individual transaction experiments.
UK Finance plans to establish a dedicated company and develop a rulebook and governance framework intended to take the system from pilot testing toward production. Participating banks also plan to issue three digital bonds during the first quarter of 2027 that can be traded and settled using tokenised deposits.
The UK is not alone. The Clearing House announced an interbank tokenised-deposit initiative in the United States in June, while international experiments including the BIS-led Project Agorá are exploring tokenised commercial bank deposits alongside tokenised central-bank money.
Lloyds completed three live Project Agorá transactions in July involving sterling, euros and Swiss francs, including a cross-currency transaction where foreign-exchange conversion, payment and settlement were linked into a single flow.
The latest UK transactions address a different problem: allowing tokenised money issued by separate commercial banks to interact.
If that interoperability can move from controlled trials into production, banks could potentially provide many of the programmability and round-the-clock settlement benefits associated with stablecoins without requiring customers to move their money outside the conventional banking system.