UK banks forge ‘digital sterling’ in landmark tokenization pilot

U.K. banks are commencing a live pilot phase for tokenized sterling deposits, a move that represents a concrete step toward modernizing the core infrastructure of the United Kingdom’s financial system using distributed ledger technology.

According to a press release on Sept. 26, UK Finance is spearheading the initiative with participation from Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide, and Santander. The project, which will run through mid-2026, aims to execute live transactions using tokenized sterling deposits.

The pilot, which will run until mid-2026, will specifically test applications in online marketplace payments, remortgaging, and digital asset settlement, focusing on practical benefits like fraud reduction and transaction speed.

Building on the Regulated Liability Network

Per the press release, the new pilot builds directly on the groundwork laid by the Regulated Liability Network, a multi-phase initiative designed to test how tokenization can be applied to money that already exists within the regulated financial system.

Earlier RLN trials demonstrated that commercial bank deposits could be upgraded into digital tokens without undermining the trust and protections that underpin the banking system. By moving into a live transaction phase, UK Finance and its member banks are stress-testing this model at scale and across real-world use cases.

The Bank of England has played a quiet but influential role in setting the direction. Governor Andrew Bailey recently urged banks to prioritize tokenized deposits over issuing their own stablecoins, framing the former as a more stable and regulated pathway to modernize money.

A critical technical feature of the pilot platform is its design for full interoperability. According to the press release, the platform is being built to work seamlessly with other emerging forms of digital money and payment systems. That includes tokenized deposits and potential future central bank digital currencies, as well as projects like the planned digital gilt (DIGIT).

The inclusion of tokenization-as-a-service ensures that even institutions without the means to develop their own digital deposit systems can participate, widening access and creating the conditions for an inclusive digital payments framework.