UK Banks Unveil ‘Digital Sterling’ in Innovative Tokenization Pilot Program
In the U.K., banks are embarking on a live pilot phase for tokenized sterling deposits, representing a significant leap forward in modernizing the UK’s financial infrastructure through distributed ledger technology.
Summary
- Six major banks are participating in the UK Finance pilot for tokenized sterling deposits, projected to run until mid-2026.
- The initiative seeks to investigate applications in marketplace payments, remortgaging, and the settlement of digital assets using distributed ledger technology.
According to a press release dated Sept. 26, UK Finance is spearheading this project in collaboration with Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide, and Santander. It will enable live transactions involving tokenized sterling deposits through mid-2026.
This pilot program, extending to mid-2026, is dedicated to assessing practical uses in online marketplace payments, remortgaging, and the settlement of digital assets, with a focus on benefits such as enhanced transaction speed and reduced fraud.
Advancing the Regulated Liability Network
The press release notes that this new pilot is a natural extension of the groundwork laid by the Regulated Liability Network, a multi-phase initiative designed to explore how tokenization can fit into the current regulated financial landscape.
Earlier RLN trials demonstrated that commercial bank deposits could be digitized into tokens while preserving the trust and protections essential to the banking industry. By progressing to a live transaction stage, UK Finance and its partner banks are testing this model at scale in various real-world scenarios.
The Bank of England has played a crucial yet subtle role in guiding this effort. Governor Andrew Bailey recently advocated for banks to prioritize tokenized deposits over the development of their own stablecoins, suggesting that the former represents a more stable and regulated pathway to currency modernization.
A key technical feature of the pilot platform is its design for full interoperability. The press release highlights that the platform aims to seamlessly interact with other emerging digital currencies and payment systems, including tokenized deposits and prospective central bank digital currencies, as well as initiatives like the planned digital gilt (DIGIT).
The provision of tokenization-as-a-service ensures that even institutions without the means to develop their own digital deposit platforms can participate, broadening access and fostering an inclusive environment for digital payments.
