UK Banks Move Tokenized Deposits Across Banks, BoE Endorses

The UK's foremost lenders have executed the initial interbank transfers via tokenised deposits, using blockchain rails within the regular banking system rather than stablecoins.

Lloyds, NatWest and Barclays processed two mortgage deals, while another set of banks trialled a simulated online marketplace transaction. This initiative, under UK Finance's Great British Tokenised Deposit scheme, bolsters the BoE's inclination towards tokens from banks rather than those from private stablecoin issuers.

Reasons for Choosing Tokenised Deposits Over Stablecoins

Tokenised deposits are standard bank accounts represented as blockchain tokens, carrying the same legal standing as existing deposits. Stablecoins, however, are usually issued by private entities and operate beyond the banking system.

Tokenized deposits, not stablecoins. The liability stays on the bank's balance sheet, so this is banks modernizing their own rails, not ceding ground to Tether or Circle. The step that matters is the last one: connecting to public networks. Interbank transfers are plumbing.

— John Fleming (@jfleming06880) September 22, 2026

BoE Governor Andrew Bailey has previously cautioned that bank-issued stablecoins could destabilise the financial system, pushing lenders toward tokenised deposits. The central bank has also retained an issuance cap even as it eased other restrictions this year.

Operation of the Pilot

According to UK Finance, HSBC and two other lenders also executed a peer-to-peer transaction that replicated an online marketplace sale. Programmable deposits held the buyer's funds until the goods were confirmed delivered.

Jana Mackintosh, UK Finance's managing director for Payments and Innovation, stated that the arrangement could reduce fraud risk. She noted that overseas interest has increased.

“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.”

— Mackintosh

The initiative now progresses toward establishing a company and a governance rulebook. Participating banks intend to issue three digital bonds in the first quarter of 2027, which can be traded and settled with tokenised deposits.

This effort is part of a larger UK institutional tokenisation push that has attracted asset managers as well as banks. In the US, The Clearing House, a banking association and payments firm, revealed its own interbank tokenised deposit project in June.

Whether the UK retains its lead depends on how swiftly that rulebook and the 2027 bond issuance become reality.