Several of Britain’s largest banks, including HSBC, NatWest, and Lloyds, are moving forward with plans to launch tokenized versions of customer deposits next year. The move follows Bank of England Governor Andrew Bailey’s call to focus on tokenization technology instead of stablecoins.
Industry group UK Finance confirmed that the banks have started pilot projects to test tokenized deposits for payments through online marketplaces. Barclays, Nationwide Building Society, and Santander are also participating in the pilot, which will run until mid-2026. The program will explore use cases in remortgaging and digital asset settlements.
Governor Bailey said in July that while he is “not against stablecoins,” he does not see their necessity and believes tokenization provides greater value. Stablecoins, a type of cryptocurrency tied to fiat currencies, have grown in popularity, but Bailey has warned that they could drain money from the banking system and pose financial stability risks.
Stablecoin regulation
Although the Financial Conduct Authority is not expected to finalize stablecoin regulations until the end of 2026, the Bank of England has stated that banks are free to experiment with tokenized deposits under the current framework.
According to HSBC’s head of global payments solutions, Manish Kohli, tokenized deposits had been limited by a lack of interoperability across institutions, but the new pilot aims to solve this issue. He added that while the pilot is focused on domestic use, the technology shows the greatest potential in cross-border payments, where demand is rising.
UK Finance managing director Jana Mackintosh said tokenization allows banks to innovate while keeping payments inside the regulated financial system.
