UK Banks Complete First Interbank Transactions Using Tokenized Sterling Deposits

Lloyds, NatWest, and Barclays complete interbank mortgage transactions using tokenized sterling

Lloyds, NatWest and Barclays have completed what UK Finance describes as the world's first interbank transactions using tokenized deposits, moving digital representations of sterling bank deposits between separate financial institutions.

Coin Bureau highlighted the development in a post on X, saying the three banks had used blockchain-based versions of bank deposits to complete mortgage transactions. The transactions were conducted through the Great British Tokenised Deposit (GBTD) initiative, which is designed to test whether tokenized commercial bank money can move between institutions on shared infrastructure.

The development moves tokenized deposits beyond individual-bank experiments and into live transactions involving multiple institutions. UK Finance said the latest transactions included two remortgage completions, in which deposit funds were locked and automatically released when the transactions reached completion.

How the Tokenized Deposit Transactions Worked

Tokenized deposits are digital representations of conventional commercial bank money recorded on distributed-ledger infrastructure. Unlike a separate cryptocurrency, the token represents an existing bank deposit and remains a liability of the issuing commercial bank.

In the mortgage transactions, funds were locked while the remortgage process was completed and then released automatically once the required conditions were met. UK Finance said the mechanism can reduce manual checks and settlement delays while allowing customers to continue earning interest on funds held in their accounts until completion.

The GBTD initiative also tested a separate consumer marketplace transaction involving banks including HSBC. In that scenario, tokenized deposits were used to demonstrate how funds could remain reserved until specified conditions were satisfied before being released to another party. The marketplace transaction was a test rather than an actual purchase of physical goods.

The significance of the latest mortgage transactions lies in their interbank nature. Banks have previously developed their own blockchain-based systems, but separate infrastructures can limit transactions between institutions. The GBTD project is specifically designed to address interoperability between participating banks.

Lloyds, NatWest and Barclays Lead the Mortgage Pilot

The three banks conducting the mortgage transactions are among the institutions participating in the broader GBTD initiative. The project also includes Barclays, HSBC UK, Lloyds Banking Group, Monzo, Nationwide, NatWest and Santander.

UK Finance said the initiative is intended to examine how tokenized commercial bank deposits can support programmable payments while retaining the regulatory protections associated with conventional bank money. The infrastructure was built by Quant, with EY providing project management and Linklaters supporting legal and rulebook development.

The project builds on earlier experiments involving tokenized sterling. In January, Lloyds completed the UK's first public blockchain transaction using tokenized deposits, issuing sterling tokenized deposits on the Canton Network and using them to purchase a tokenized UK government bond from Archax.

Lloyds also completed three live tokenized-deposit transactions through Project Agorá in July, covering sterling, euros and Swiss francs and testing cross-currency payment and settlement flows.

UK Banking Moves Toward Interoperable Tokenized Money

The latest GBTD transactions provide a live test of whether tokenized deposits can operate across different banks rather than remaining confined to individual internal systems.

UK Finance said the project is continuing to explore use cases including person-to-person payments, remortgage transactions and digital-asset settlement. The organization has also said the platform is designed to be interoperable with existing payment systems and different forms of digital money.

The completion of the mortgage transactions markets the latest stage of the UK's effort to test blockchain-based commercial bank money in real-world payment scenarios, with further work focused on how the infrastructure can operate across participating financial institutions.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.