10-02-2025 
|
Getting your Trinity Audio player ready...
|
UK Finance, a leading trade association representing the banking and finance industry in the United Kingdom, has launched a collaborative pilot project to deliver the first live transactions of tokenized sterling deposits in the country.
- First live tokenized sterling deposits in the U.K.
- What will the tokenized deposits deliver?
- UK Finance’s ambitions
The tokenized deposits are a digital representation of traditional sterling commercial bank money, retaining “the trust and regulatory protections of conventional deposits, while offering benefits such as enhanced speed and fraud protection,” said the trade group, in a September 26 press release.
According to UK Finance, the scheme will build on the Regulated Liability Network (RLN), which was announced in April 2024 as a platform designed to foster innovation in financial transactions. The first phase of the RLN involved the creation of a common “platform for innovation” across multiple forms of money, including existing commercial bank deposits and a shared ledger for tokenized commercial bank deposits.
The tokenized sterling deposits pilot will run until mid-2026 and aims to demonstrate tangible benefits to customers, businesses, and the wider U.K. economy, including giving users greater control over their payments, stronger fraud prevention, and more efficient settlement processes.
The platform will be fully interoperable between new forms of digital money, payment systems, and institutions, said UK Finance. It also offers “tokenization-as-a-service,” allowing organizations without their own tokenized deposit capabilities to participate.
“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 UK to lead globally in setting standards for tokenized money,” said Jana Mackintosh, Managing Director of UK Finance. “Andrew Bailey, Governor of the Bank of England, recently called for innovation in how digital technology is applied to the money we use today. That’s exactly what tokenised deposits represent: a secure, regulated evolution of the payments landscape.”
The pilot will deliver tokenized deposits and programmable payments for three specific use cases: the first is person-to-person payments via online marketplaces, which UK Finance said would reduce fraud and enhance buyer and seller confidence; secondly, remortgaging processes, with the aim being to improve transparency, speed up transactions, and mitigate conveyancing fraud; and in the final use case it will explore digital asset settlement, connecting tokenized customer money to digital assets for seamless exchange.
Among the firms participating in the pilot are several prominent names in the finance and banking sector, including Barclays (NASDAQ: BCS), HSBC (NASDAQ: HSBC), Lloyds Banking Group (NASDAQ: LYG), NatWest (NASDAQ: RBSPF), Nationwide, and Santander (NASDAQ: SAN). They will be supported by financial services infrastructure firm Quant, ‘big four’ accountancy firm EY, and international law firm Linklaters.
“In the near future, the UK will likely witness the development and adoption of multiple forms of digital money and payments. We believe commercial banks will have a role to play across all of these forms,” said Ryan Hayward, Head of Digital Assets at Barclays. “The upgrading of bank deposits to a digital form will help to ensure that commercial bank money remains central to the economy and customers continue to benefit from the protections and trust that go alongside that form of money.”
Meanwhile, Richard Hay, Global Co-Head of Fintech at Linklaters, described the pilots as “a significant step forward in the evolution of digital money in the UK.”
He added that, “by enabling live transactions with tokenised sterling deposits, the industry is harnessing technology to enhance trust, security and efficiency across critical payment and settlement workflows.”
UK Finance said the pilot will enable commercial bank money to support U.K. government ambitions for growth and innovation, including the current plans for a digital gilt (DIGIT). This scheme, announced in March 2025, aims to enable the government to explore how distributed ledger technology (DLT) can be applied across the lifecycle of the U.K. sovereign debt issuance process, as well as to “catalyze the development of U.K. based DLT infrastructure.”Going forward, UK Finance plans to host engagements and events throughout the pilot to provide all stakeholders with updates on the work and next steps.
The digital push
In the past few years, UK Finance has made its ambitions to support digital evolution and innovation in the space clear, with tokenization high on the agenda.
In September, preceding United States President Donald Trump’s state visit to the U.K., it cosigned a letter to the British Business Secretary Peter Kyle and Economic Secretary to the Treasury Lucy Rigby, arguing that distributed ledger technology (DLT) should be a “core strand” of a proposed “U.K.-U.S. Tech Bridge.”
The letter, also signed by several other leading trade groups, specifically highlighted stablecoins and tokenization as “strategically relevant and important sectors” for both the U.S. and the U.K.
It went on to emphasize the importance of DLT, stating that it “represents a technological transformation” and that “alongside other emerging technologies, it is driving the next generation of financial services and infrastructure – improving capital flows, facilitating faster and cheaper payments, driving efficiencies and productivity, and widening financial inclusion.”
In May, UK Finance also published its response to HM Treasury’s draft regulatory regime for Cryptoassets, released on April 29.
Under the draft rules, digital asset exchanges, dealers, and agents would be brought under the U.K.’s financial services regulatory regime, and digital asset firms with U.K. customers would have to meet clear standards on transparency, consumer protection, and operational resilience—”just like firms in traditional finance,” said the Treasury.
The U.K. Chancellor of the Exchequer, Rachel Reeves, also indicated that the rules would further align the U.K. with the U.S., thus ensuring clear support for innovation and the avoidance of onerous regulatory roadblocks to innovative tech development.
UK Finance welcomed the Treasury’s intent to deliver the regulatory framework for cryptoassets and stablecoins promptly, but warned the current drafting doesn’t provide sufficient clarity and “could result in a number of unintended consequences, threatening to challenge growth and innovation in the UK’s emerging digital assets space.”
Watch: Blockchain and banking
Recommended for you
