UK Finance to Test 3 Use Cases for Tokenized Sterling Deposits

Trade association UK Finance and several financial institutions have launched a pilot project that they said will include the first U.K. live transactions of tokenized sterling deposits (GBTD).

The pilot will cover three use cases for GBTD: person-to-person payments via online marketplaces, remortgaging processes and digital asset settlements, UK Finance said in a Friday (Sept. 26) press release.

It will run until the middle of 2026, according to the release.

The pilot project’s participants include Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide and Santander, and its supporters include Quant, EY and Linklaters, per the release.

“This project is a powerful example of industry collaboration to deliver next generation payments for the benefit of customers and businesses — and an opportunity for the U.K. to lead globally in setting standards for tokenized money,” UK Finance Managing Director Jana Mackintosh said in the release.

This pilot phase builds upon the successes of earlier phases of the U.K. Regulated Liability Network (RLN) project, according to the release.

UK Finance said in a September 2024 press release that the RLN project is experimenting with a new type of financial market infrastructure that includes tokenization, programmability and other new capabilities for payments and settlement.

Reuters reported Friday that the latest phase of this project came after Bank of England Governor Andrew Bailey said in July that tokenization offers more value than stablecoins.

Bailey said stablecoins could threaten financial stability by taking money out of the banking system, according to the report. As for tokenized deposits, the Bank of England has said banks can experiment with them within existing regulation, per the report.

It was reported in July that Bailey’s focus on banks offering tokenized deposits came as he expressed doubts about a central bank digital currency, which in the past the Bank of England had considered “likely” to be needed.

PYMNTS reported in September 2024 that several monetary authorities, banking consortia and banks had announced pilots and other programs aimed at testing the real-world application of tokenized deposits.

UK Finance said at the time: “The tokenization of deposits can be implemented so as to be neutral from a legal and regulatory perspective, as compared with traditional deposits.”

For all PYMNTS digital transformation coverage, subscribe to the daily Digital Transformation Newsletter.