Britain's largest banks have completed what UK Finance, the country's banking industry association, describes as the world's first transactions using tokenized deposits to move money between separate institutions — a step toward bringing blockchain-based payments into mainstream interbank operations. The trials were reported this week.

Lloyds, NatWest and Barclays carried out two mortgage transactions using the technology, the association told Reuters. In a separate trial, a group of three banks including HSBC ran a person-to-person payment test this week that simulated an online marketplace purchase.

🇬🇧NEWS: UK's biggest banks have completed the world's first interbank transactions using blockchain-based tokenized deposits. Lloyds, NatWest and Barclays used tokenized deposits in two mortgage transactions, while HSBC and other banks tested a peer-to-peer payment. pic.twitter.com/p30uapcr51

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A Project to Rebuild Interbank Payments

The trials form part of the Great British Tokenised Deposit project, which UK Finance runs. Participating banks committed to the effort through a pilot launched last year. The initiative aims to establish shared infrastructure and rules for moving tokenized deposits between institutions. According to the association, tokenized deposits could cut transaction costs and speed up processing compared with existing payment systems — claims that banks have made about moving tokenized assets more broadly.

How Tokenized Deposits Differ From Stablecoins

Tokenized deposits turn money held in a bank account into a digital token recorded on a blockchain. The token carries the same legal status as the deposit it represents, meaning it remains a claim on the issuing bank. That sets them apart from stablecoins, which are usually issued by companies and pegged to the US dollar or another currency. Because stablecoins move money out of the banking system, they have raised questions about the cost of credit and monetary sovereignty. The Bank of England has said it would rather see banks experiment with tokenized deposits than with stablecoins. For the banks involved, that design keeps customer money inside the banking system even as it moves over blockchain rails.

Breaking the Interoperability Barrier

Banks and other financial firms have spent more than a decade trying to bring blockchain into their own systems, creating tokens that stand in for deposits, stocks, bonds and currencies. The problem was that each lender built its own blockchain platform, and those separate systems could not talk to each other — which blocked transfers between institutions. The new trials were designed to show that this barrier can be cleared, with value moving directly between institutions rather than staying inside a single bank's platform. That shift — from closed-loop pilots to transfers across institutions — is what moves tokenized deposits from isolated experiments toward the shared infrastructure the project set out to build.

Programmable Payments in Action

In the simulated online purchase, programmable deposits set money aside in the buyer's account. The funds were released to the seller only after the goods were recorded as received. Money moved between accounts during the test, but no real goods changed hands. That automatic release is the essence of programmability: payment conditions attached to the deposit itself, with the transfer executing only once those conditions are met.

Jana Mackintosh, UK Finance's managing director for Payments and Innovation, said the setup showed the technology could lower fraud risk, since the release of funds was tied to confirmation of delivery.

The two remortgage transactions used a similar structure: funds were locked during the process and released automatically once each property transaction completed.

Overseas Interest and a Parallel Effort in the US

Mackintosh said other countries have been asking about the project over the past year, citing conversations with counterparts in Europe who wanted to understand how to catch up. The United States has its own effort underway: The Clearing House, a banking association and payments company, announced an interbank tokenized deposit project in June. With banking groups on both sides of the Atlantic now working on the same challenge — moving tokenized deposits between institutions rather than within them — the UK trials have become a reference point other jurisdictions are studying.

Next Stop: Digital Bonds

The project now plans to set up a company and write a rulebook and governing framework, a structure meant to carry the work from the pilot stage into full production. After that, banks involved in the project plan to issue three digital bonds in the first quarter of 2027 that can be traded and settled with tokenized deposits. Those milestones are the ones to watch: the new entity and rulebook are the route from pilot to production, and the bond issuance would extend the technology beyond payments into the settlement of tradable securities.