UK Banks Complete World’s First Interbank Tokenized Deposit Transfers —

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…