UK’s largest banks complete world’s first interbank transactions using tokenized deposits

The U.K.'s largest banks executed the world’s first customer transaction using tokenized British pound deposits on a share platform.

The money movement included remortgage payments and a test of a consumer purchase, according to an announcement on Thursday.

The project is testing whether regulated bank money can move in tokenized form between institutions and in retail payments. The deposits moving across a common system involving several banks differs from a recent initiative by Lloyds to use tokenized deposits to buy a tokenized gilt within its own arrangement.

Barclays, HSBC, Lloyds Banking Group, Monzo, Nationwide, NatWest and Santander took part in the Great British Tokenized Deposit initiative. The platform was built by Quant, a distributed ledger technology (DLT) service provider.

The tests come as the Bank of England and Financial Conduct Authority prepare the U.K.’s financial system for tokenization and longer settlement hours. Regulators want to support tokenized markets while considering stablecoins for institutional settlement.

The group will next test the settlement of digital assets using tokenized customer money, according to the announcement.

“These live transactions show how tokenized deposits can deliver practical, real-world benefits, contingent payments that give customers greater control over their money,” said Lucy Rigby, economic secretary to the Treasury.

For businesses and customers, tokenised deposits have the potential to speed up settlement, improve cash-flow management and provide more convenient, transparent and secure ways to pay.

“Tokenized deposits have the potential to play a key role in the evolution of digital money and payments in the U.K. and beyond,” said Gilbert Verdian, founder and CEO of Quant,

Tokenized deposits are digital records of money already held in a bank account. Unlike stablecoins, they remain a liability of the issuing bank and retain the protections attached to conventional deposits.