TLDR Barclays, Lloyds and NatWest completed what UK Finance called the world’s first interbank transactions using tokenized deposits. The banks carried out two remortgage transactions, while
Britain’s largest banks have completed what UK Finance called the world’s first interbank transactions using tokenized deposits. The tests covered mortgage payments and person to person payments.
Lloyds Banking Group, NatWest and Barclays carried out two remortgage transactions using the new system. A separate group of three banks, including HSBC, tested a payment linked to a simulated online marketplace purchase.
The work is part of UK Finance’s Great British Tokenised Deposit initiative. The project tests whether digital versions of sterling bank deposits can move between different banks.
Tokenized deposits are regular bank deposits recorded on a blockchain or similar digital ledger. The money stays a liability of the bank that issued it and keeps the same legal protections as a normal deposit.
Earlier bank projects mostly ran inside single systems. That made it hard to send money between customers at different banks.
The current pilot was built so banks could work together. Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide and Santander took part, with support from Quant, EY and Linklaters.
In the marketplace test, money stayed reserved in the buyer’s account until the deal’s conditions were met. Funds went to the seller only after the goods were confirmed as received. No real goods changed hands because the test was simulated.
Jana Mackintosh, UK Finance’s managing director for Payments and Innovation, said the setup showed how programmable deposits could lower fraud risks in online sales.
The remortgage transactions used a similar method. Funds were locked during the property process and released automatically once the deal was complete.
Tokenized deposits are different from stablecoins. They represent money held inside the commercial banking system, while stablecoins are usually issued by private companies backed by reserves.
The Bank of England has encouraged banks to test tokenized deposits. Deputy Governor Sarah Breeden said in May that the bank wants deposits, tokenized deposits, regulated stablecoins and possibly a retail central bank digital currency to work side by side.
The central bank’s final stablecoin policy dropped proposed limits on individual holdings. It replaced them with an initial £40 billion issuance limit per systemic token.
Lloyds has run other tests too. In August, it completed three live transactions through the Bank for International Settlements led Project Agorá, covering sterling, euros and Swiss francs.
Earlier in 2026, Lloyds issued tokenized sterling deposits on the Canton Network. It used them to buy a tokenized UK government bond from Archax.
Mackintosh said other countries, including counterparts in Europe, have been asking about the project over the last 12 months. In the United States, The Clearing House announced its own interbank tokenized deposit project in June.
Separately, the UK government expects the first transaction of its Digital Gilt Instrument, or DIGIT, by the end of the first quarter of 2027.
UK Finance now plans to set up a company and create a rulebook and governance framework for the project.
Participating banks plan to issue three digital bonds in the first quarter of 2027. Mackintosh told Reuters these bonds can be traded and settled using tokenized deposits.
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