Key highlights:
- Lloyds, NatWest, and Barclays completed the world’s first interbank tokenized deposit transactions
- Another group of banks, including HSBC, tested a simulated online purchase using person-to-person tokenized payments
- The banks plan to issue three digital bonds in the first quarter of 2027
For the first time, banks have successfully moved tokenized deposits between different financial institutions using blockchain technology, Reuters reported. Lloyds, NatWest, and Barclays completed two mortgage refinancing transactions using tokenized deposits.
Additionally, three banks featuring HSBC carried out a test person-to-person payment designed to simulate an online marketplace purchase. These trials are part of the Great British Tokenised Deposit project being run by UK Finance, the country’s banking industry association.
Moving digital money between banks has been difficult
Banks around the world have been experimenting with blockchain technology for more than ten years, building their systems to represent things like deposits, stocks, bonds, and currencies as digital tokens.
The problem was that each bank had a different system. The varying systems meant tokenized money created by one bank couldn’t easily move to another bank.
This test changes that. It shows, for the first time, that tokenized deposits issued by one bank can move to and settle with a different bank. This is a major step toward a shared financial infrastructure that many banks can use together.
A tokenized deposit is a bank deposit that has been converted into a digital token that can move on a blockchain. Legally, it is treated exactly the same as money in a normal bank account. Only the way it moves has changed.
This is different from stablecoins, which are issued by private companies and are backed by reserve assets.
The Bank of England shared previously that it would rather see banks build out tokenized deposits than lose ground to privately issued stablecoins. The central bank is concerned that if a chunk of money is converted into stablecoins, it could pull funds out of the banking system, which could affect how much banks are able to lend.
How the technology was tested in practice
The trial showed some of the advanced features that come with tokenized money. In the simulated shopping test, smart contracts were used to hold the buyer’s funds and only release them to the seller once the goods were confirmed as received. No physical goods were used in the test, but it showed how payment rules can be built into the transaction.
A similar test was done for mortgage refinancing transactions. Funds were automatically released immediately after the property transaction was completed, cutting out the manual steps that slow down this property settlement process.
Jana Mackintosh, UK Finance’s managing director for payments and innovation, said these programmable features could help lower the risk of fraud, since payments are released after certain conditions are verified. She also added that other countries are looking to adopt the UK’s strategy.
“In the last 12 months, other jurisdictions have been speaking to us in earnest about what we’ve done, trying to understand how they can now catch up,” she said.
Progress comes after many test runs
This progress came after previous tests. In January 2026, Lloyds completed the UK’s first tokenized deposit issuance on a public blockchain, using it to purchase tokenized UK government bonds.
In July, Lloyds also took part in an international project called Project Agora, which tested real transactions using tokenized deposits in British pounds, Swiss francs, and euros.
Outside the UK, the United States has also made some progress. The Clearing House, which runs interbank payment networks, announced its tokenized deposit project in June, backed by top American banks. Canada’s largest banks are also working on a similar project using the Canadian dollar.
It is also worth mentioning that banks in the UK project are planning to issue three digital bonds in the first quarter of 2027 that could be traded and settled using tokenized deposits. This could extend the technology into capital markets.
Source:: UK Banking Giants Complete the World's First Blockchain Interbank Deposit Transactions