Britain’s largest lenders have pulled off a milestone that has eluded the banking industry for more than a decade: moving tokenized deposits between different institutions on blockchain rails. The transactions, completed under an industry-wide pilot, mark the first time commercial bank money represented as digital tokens has been transferred across separate banking systems, pushing the technology from internal experimentation toward a viable settlement layer for tokenized assets.
The work is part of the Great British Tokenised Deposit (GBTD) project coordinated by UK Finance, the banking industry association. Lloyds Banking Group (LYG), NatWest Group (NWG) and Barclays (BCS) executed two mortgage refinancing transactions using tokenized deposits, while a separate group of three banks including HSBC (HSBC) ran a person-to-person payment that simulated an online marketplace purchase. The seven institutions involved in the broader pilot are Barclays, HSBC, Lloyds, Monzo, NatWest, Nationwide and Santander, with Quant, EY and Linklaters providing technical and legal support.
The significance lies in interoperability. For years, individual banks have built their own blockchain systems to tokenize deposits, stocks, bonds and currencies, but those systems could not talk to one another. Each lender’s proprietary network acted as a walled garden, preventing the very cross-institution movement that would make tokenized money useful at scale. The latest trials demonstrate that deposits issued by one bank can circulate and settle with a different bank, a step toward common financial infrastructure rather than isolated experiments.
How Programmable Deposits Work
Tokenized deposits are not a new type of money. They represent existing commercial bank deposits rendered as digital tokens on a blockchain or distributed ledger. The legal status of the deposit remains identical to money held in a traditional bank account; only the transfer mechanism changes. That distinction matters because it separates tokenized deposits from stablecoins, which are separate liabilities issued by private companies and backed by reserve assets.
The Bank of England has made its preference clear: it would rather see banks innovate with tokenized deposits than cede ground to privately issued stablecoins. The concern is that a large-scale shift of funds into stablecoins could drain the banking system, affecting lending capacity, credit costs and monetary sovereignty. Governor Andrew Bailey has framed tokenization as a way to modernize existing forms of money rather than replace them. “We are now working with the banks to design and implement the introduction of so-called tokenised money,” he said in a recent speech.
Deputy Governor Sarah Breeden has articulated a broader vision of a “multi-money” system in which conventional deposits, tokenized deposits and regulated systemic stablecoins could coexist and convert at par value. The International Monetary Fund defines tokenized deposits as bank liabilities transferred on distributed-ledger technology, while the Bank for International Settlements has argued they align more closely with the existing two-tier monetary system than stablecoins do.
The simulated marketplace transaction showcased the programmability that tokenized deposits enable. Using smart contracts, funds were locked in the buyer’s account and released to the seller only after goods were confirmed as received. No physical goods changed hands in the test, but the mechanism demonstrated how payment conditions can be embedded directly into the transaction flow. In the remortgage trades, locked funds were automatically released once the property transaction completed, eliminating manual reconciliation steps that typically slow down real estate settlements.
Jana Mackintosh, UK Finance’s managing director for payments and innovation, said the programmable features could reduce fraud risk by tying payment release to verifiable conditions. She also noted that international interest in the project has accelerated. “In the last 12 months, other jurisdictions have been speaking to us in earnest about what we’ve done, trying to understand how they can now catch up,” she said, citing conversations with counterparts in Europe.
The project now has a defined path toward commercialization. UK Finance plans to establish a dedicated company and develop a rulebook and governance framework to support the transition from pilot to full production. Participating banks intend to issue three digital bonds in the first quarter of 2027 that can be traded and settled using tokenized deposits, extending the technology’s reach from payments and property transactions into capital markets.
The UK has been building toward this moment through a series of incremental steps. In January 2026, Lloyds completed the country’s first tokenized deposit issuance on a public blockchain, using the Canton Network to purchase tokenized UK government bonds. In July, Lloyds took part in Project Agora, an international initiative testing real-value transactions involving tokenized deposits denominated in sterling, Swiss francs and euros. One cross-currency trade in that program linked foreign exchange conversion, payment and settlement into a single workflow.
Regulators are moving in parallel. The Bank of England and the Financial Conduct Authority published a joint vision for wholesale market tokenization in May, arguing that the technology could make securities issuance, asset management and settlement faster and cheaper. They also cautioned that clearer regulatory standards and financial infrastructure arrangements are still needed before tokenized finance can operate at scale.
The Global Race
The UK is not alone. In the United States, The Clearing House, which operates interbank payment networks including RTP and CHIPS, announced a tokenized deposit project in June backed by major US banks. The initiative aims to connect tokenized commercial bank money with existing payment rails. Bank of America’s Mark Monaco said the effort “brings together the innovation of digital finance with the trust, scale, and settlement certainty of established bank payment infrastructure.”
Canada’s Big Six banks are collaborating on a Canadian-dollar tokenized deposit rail, and the country’s banking regulator, OSFI, clarified on September 10 that the underlying technology of a financial product does not determine its legal nature. SWIFT has also lined up 17 banks across six continents for tokenized cross-border payment trials.
The potential market is substantial. Citi Institute projects tokenized financial assets could reach $5.5 trillion by 2030 in its base case and $8.2 trillion in a bull scenario, compared with a $1.9 trillion stablecoin base case. Binance Research estimates real-world asset value on-chain at $34.18 billion as of September 15, up 85.2% year to date, though only about 12% of tracked tokenized capital is actively deployed in liquidity, lending or collateral markets.
MetricBase CaseBull CaseTokenized financial assets by 2030 (Citi Institute)$5.5 trillion$8.2 trillionStablecoin market (Citi Institute)$1.9 trillion-Real-world assets on-chain, Sept 15 (Binance Research)$34.18 billion-Annual tokenized-deposit flows at major global banks (McKinsey)$4 trillion+-
Note: Figures reflect third-party projections and estimates cited in industry reporting.
For banks, the strategic question is whether tokenized deposits capture settlement volume that would otherwise flow to stablecoins, or whether they become the trusted cash leg that helps tokenized securities and real-world assets scale. UK Finance will hold a project webinar on October 6 to detail next steps.
The remaining hurdles are not trivial. Interoperability standards across different bank systems, regulatory responsibility, cybersecurity, liquidity management and legal frameworks all require further work before tokenized deposits can support large-scale commercial activity. But the UK trials have answered a foundational question: bank money can move between institutions on shared blockchain infrastructure without losing its legal identity as a deposit. That proof, more than any single transaction, is what makes the milestone significant.