UK Banks Test Tokenized Deposits in Groundbreaking Collaboration

Seven major banks in the UK have come together to test tokenized deposits, which could revolutionize the way money is used across different institutions. The Great British Tokenized Deposit project involves Barclays, HSBC, Lloyds Banking Group, Monzo, Nationwide, NatWest, and Santander using a shared platform developed by Quant, a distributed ledger technology provider.

The tests were conducted to explore how customers' money in bank accounts could be used for transactions across different institutions. The project's key feature is that the transactions were tested on a shared system spanning multiple banks, rather than within a single bank's infrastructure.

Tokenized deposits are digital tokens representing money already held in a bank account. They retain the protections associated with traditional deposits and do not represent the issuing of separate stablecoins. The benefits targeted by the project include faster payment settlement, easier cash flow management for businesses, and greater control for customers over their money through payments subject to specific conditions.

The next phase of the project will involve testing using tokenized customer money to complete settlement for digital asset trades. This could take the work beyond mortgage and shopping scenarios and explore new uses for tokenized deposits.

The tests are taking place as the Bank of England and the Financial Conduct Authority prepare the financial system for tokenization and longer settlement hours.