Britain’s largest banks are getting ready to launch tokenized customer deposits by 2026, after a strong push from the Bank of England (BoE).
Governor Andrew Bailey called on banks to prioritize this technology instead of diving into the unstable world of stablecoins. Now, big names like HSBC, NatWest, Lloyds, Barclays, Santander, and Nationwide are involved in a new pilot to test how far they can take digital bank money.
The pilot is already underway. It uses blockchain to create digital versions of deposits and move them in real-time across online marketplaces.
This is being done under the umbrella of UK Finance, the group coordinating efforts between banks and regulators. The project runs until mid-2026, and they’re testing everything from regular payments to remortgaging and settlement of digital assets.
Banks double down on tokens after Bailey’s stablecoin warning
This move comes just weeks after Bailey made his position clear. Back in July, he told The Times that he was “not against stablecoins,” but didn’t see the point of them. He thinks tokenized deposits actually provide real value, unlike stablecoins, which are pegged to fiat currencies but controlled by non-bank entities.
Bailey also warned that stablecoins could pull money out of the traditional banking system, increasing financial risk. The UK’s Financial Conduct Authority (FCA) won’t finish drafting its stablecoin regulations until late 2026.
But that hasn’t stopped the BoE from allowing banks to move ahead with tokenized deposits under current rules. One UK bank official admitted the tokens don’t have the flashy image that stablecoins do, but said they’re still a huge tech step forward. There’s no need to impress crypto bros, they just want this to work in the real world.
This isn’t just a UK thing either. A bunch of European banks said this week that they’re planning to launch a euro-backed stablecoin, while on the other side of the Atlantic, Trump’s GENIUS Act is already reshaping the U.S. market.
Several American banks say they’re thinking about jumping into the stablecoin game now that there’s more clarity around regulation.
But inside the banking world, some heavy hitters are betting on tokens instead. Citi’s CEO said back in July that tokenized deposits might actually be more important than stablecoins.
And over at HSBC, Manish Kohli, the head of global payments solutions, said tokenized deposits used to be useless across institutions, but that’s changing fast. “That’s where we’re seeing a lot of client demand,” he told Reuters, pointing to cross-border payments as the biggest area of interest.
Jana Mackintosh, who leads payments and innovation at UK Finance, said tokenization helps banks build new tools while keeping everything inside the regulated system, with no cowboy crypto firms needed.
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