UK Finance pilots tokenized sterling deposits with six major banks
News Summary
UK Finance, a trade association representing financial services firms, has launched a joint pilot project for tokenized sterling deposits (GBTD), aiming to provide a digital representation of traditional British pound commercial bank money. The pilot, involving six major banks including Barclays, HSBC, and Lloyds, will run until mid-2026. The initiative seeks to explore benefits such as greater control over payments, fraud prevention, and more efficient settlement processes, with Quant Network providing the underlying infrastructure. Quant's involvement builds on its successful delivery of the first phase of the Regulated Liability Network (RLN), launched by UK Finance in 2024. The GBTD project will test three key use cases: online marketplace payments, remortgaging processes, and wholesale bond settlement. This pilot coincides with the UK Financial Conduct Authority (FCA) finalizing its crypto regulatory framework, expected to take full effect in 2026. The UK Treasury published a policy note in April 2025 differentiating qualifying stablecoins, tokenized deposits, and electronic money. Meanwhile, the EU’s Markets in Crypto-Assets (MiCA) regulation, fully in force since late 2024, explicitly excludes tokenized deposits, which remain governed under traditional banking and deposit frameworks.
Background
Tokenization is the process of converting real-world assets, such as money or securities, into digital tokens on a blockchain, aiming to enhance efficiency, transparency, and programmability. Tokenized sterling deposits are part of this trend, representing an alternative form of digital money distinct from central bank digital currencies (CBDCs). UK Finance is a trade association representing over 300 financial services firms in the United Kingdom. Quant Network is a UK-headquartered company specializing in blockchain interoperability, previously having delivered infrastructure for the Regulated Liability Network (RLN) project, which explored shared-ledger-based financial market infrastructure. 1. The UK Financial Conduct Authority (FCA) is the primary financial regulator in the UK, responsible for setting and enforcing financial services regulations. The EU's Markets in Crypto-Assets (MiCA) regulation is one of the world's first comprehensive regulatory frameworks for crypto assets, designed to provide legal certainty across the EU's crypto market.
In-Depth AI Insights
What are the deeper strategic implications of this pilot for the UK's global positioning in digital finance? This pilot underscores the UK's pragmatic and targeted strategy in digital financial innovation, particularly in the impactful area of tokenized deposits. - The distinct regulatory approach compared to the EU's MiCA (which excludes tokenized deposits) could provide the UK with a competitive edge in fostering a flexible, bank-centric digital currency ecosystem. This might attract financial institutions and tech firms seeking regulatory clarity and room for innovation. - By partnering with private sector technology providers like Quant Network, the UK is cultivating a private sector-led, regulator-supported model for digital financial infrastructure, contrasting with potential central bank-led digital currency paths favored by some nations. This could facilitate faster market adoption and broader innovation. Beyond efficiency gains, how might tokenized deposits fundamentally reshape the way value is moved and managed within the financial system in the long term? The true transformative potential of tokenized deposits lies in their