Britain's Banks Opt for Blockchain-Backed Deposits Over Stablecoins

Britain's top banks have successfully completed interbank transfers of tokenized deposits using blockchain technology. The trial, part of UK Finance's Great British Tokenised Deposit project, involved Lloyds, NatWest, and Barclays in two mortgage transactions, while a separate group tested a simulated marketplace purchase.

The Bank of England has expressed its preference for bank-issued tokens over privately issued stablecoins, citing concerns that the latter could destabilize the financial system. Tokenized deposits are ordinary bank deposits represented as blockchain tokens, carrying the same legal status as money already sitting in an account.

UK Finance's managing director for Payments and Innovation, Jana Mackintosh, said the setup could cut fraud risk and has sparked interest from abroad. The project now moves toward setting up a company and a governing rulebook, with participating lenders planning to issue three digital bonds in the first quarter of 2027.

The push sits inside a broader UK institutional tokenization drive that has drawn in asset managers alongside banks. This initiative has also been followed by similar efforts in other countries, including The Clearing House's interbank tokenized deposit project announced in June.