Britain’s largest banks have completed the world’s first interbank transactions using blockchain-based tokenized deposits. Lloyds, NatWest, and Barclays used tokenized deposits to settle two mortgage transactions, while HSBC and other banks separately tested a peer-to-peer payment simulating an online marketplace purchase, according to UK Finance and Reuters.
The work is part of the Great British Tokenised Deposit project run by industry body UK Finance, which launched a pilot last year. Tokenized deposits convert money held in a bank account into a digital token recorded on a blockchain, but crucially they carry the same legal status as regular bank deposits. This distinguishes them from privately issued stablecoins, which move money outside the banking system and have raised concerns about credit costs and monetary sovereignty. The Bank of England has expressed a preference for banks experimenting with tokenized deposits over stablecoins.
Jana Mackintosh, UK Finance’s managing director for Payments and Innovation, said the programmable deposit test showed the technology could lower fraud risk: funds were set aside in the buyer’s account and released to the seller only after goods were recorded as received. The remortgage transactions used a similar structure, with locked funds released automatically once the property transaction completed. No real goods changed hands in the marketplace simulation.
The breakthrough addresses a long-standing barrier: banks previously built separate blockchain platforms that could not communicate with each other, blocking interbank transfers. The new trials were designed to show that obstacle can be cleared. UK Finance says tokenized deposits could cut transaction costs and speed processing compared with existing payment systems.
The project now plans to establish a company and write a rulebook and governing framework to move from pilot stage into full production. Participating banks plan to issue three digital bonds in the first quarter of 2027 that can be traded and settled with tokenized deposits. Mackintosh noted that counterparts in Europe have been asking about the project over the past year, while the United States has its own effort underway through The Clearing House, which announced an interbank tokenized deposit project in June.
The UK’s Financial Conduct Authority oversees banking regulation, providing a framework for blockchain experimentation among major lenders.
