Britain's largest banks have completed the world's first interbank transactions using tokenized deposits, a milestone marking a step toward using on-chain commercial bank money for payments and settlement.

Lloyds Banking Group, NatWest, and Barclays completed two remortgage transactions using tokenized sterling deposits, while a separate group of three banks, including HSBC, carried out a simulated customer-to-customer payment designed to replicate an online marketplace purchase, according to UK Finance, the trade association for the UK banking and finance industry.

Shared Infrastructure Under the GBTD Project

The transactions were conducted under the Great British Tokenised Deposit (GBTD) project, an initiative involving Barclays, HSBC UK, Lloyds, Monzo, Nationwide, NatWest, and Santander. The lineup spans traditional high-street lenders as well as digital challenger bank Monzo and building society Nationwide. The shared infrastructure underpinning the trials was developed by blockchain technology company Quant.

Tokenized deposits are digital representations of commercial bank money held in conventional accounts. Unlike privately issued stablecoins, they remain liabilities of regulated banks and retain the legal and regulatory protections associated with bank deposits. In practice, this means a tokenized deposit is not a separately issued crypto asset but a digital form of money that stays on a regulated bank's balance sheet.

Programmable Payments Put to the Test

The trials tested the ability to move bank money between institutions while allowing payments to be programmed around specific conditions. In re-mortgage transactions, funds were automatically released once the property transaction was completed. In the simulated online purchase, money was held in the buyer's account and released to the seller after delivery was confirmed, although no real goods changed hands.

Banks and financial institutions have spent years experimenting with on-chain representations of deposits, securities and currencies. Systems built independently by individual banks, however, have historically made it difficult for tokenized assets to move between institutions. That gap is what gives the completed transactions their significance: for the first time, tokenized commercial bank money moved between institutions rather than staying within a single bank's own system. The GBTD project is intended to address that interoperability problem by creating shared infrastructure for tokenized commercial bank money.

The initiative also aligns with the Bank of England's preference for regulated, bank-based forms of digital money. The central bank has expressed concerns that widespread use of privately issued stablecoins could shift deposits away from commercial banks, potentially affecting bank funding and the wider financial system. A Bank of England policymaker has previously said tokenized deposits are "probably going to take over from stablecoins" about five years from now.

From Pilot to Production

UK Finance said the project will now move toward establishing a company, rulebook, and governance framework to support a transition from the pilot to full production.

The participating banks also plan to issue three digital bonds in the first quarter of 2027 that can be traded and settled using tokenized deposits, extending the technology from payments into digital-asset settlement.

Parallel Efforts in Other Markets

The development comes as banks in other major markets pursue similar infrastructure. Canada's six largest banks are exploring a shared Canadian-dollar tokenized deposit system, while U.S. financial institutions are developing their own interbank tokenized-deposit networks.

The news also came in the same week that the European Central Bank (ECB) launched Pontes, an on-chain institutional settlement system for tokenized assets that allows wholesale transactions in tokenized financial assets to be settled using central bank money. The launch marked a major step in the Eurosystem's plans to integrate distributed-ledger technology into European financial markets. Taken together, the UK, Canadian, U.S., and euro-area initiatives show regulated forms of digital money moving from individual experiments toward shared settlement infrastructure across major markets at the same time.