Britain’s biggest lenders are set to launch tokenised versions of customer deposits next year in response to Bank of England Governor Andrew Bailey’s call to prioritize the technology over stablecoins. Tokenisation on blockchain can make transactions faster, cheaper, and safer. Banks like HSBC, NatWest, and Lloyds are already piloting tokenised deposits for payments.

Bailey expressed skepticism towards stablecoins, stating he sees more value in tokenisation. Stablecoins, linked to fiat currency, have surged in popularity, with U.S. President Donald Trump’s GENIUS Act providing regulatory clarity. European banks are also planning a euro-denominated stablecoin launch. Bailey warns stablecoins could destabilize financial systems and urges against banks issuing their own.

The UK’s Financial Conduct Authority is not expected to finalize stablecoin regulation until 2026, but the Bank of England allows banks to experiment with tokenised deposits within existing rules. While tokenised deposits lack the brand image of stablecoins, they offer a significant technological upgrade. Many banks, like Citi, view tokenised deposits as more crucial than stablecoins.

Tokenised deposits, currently limited by their inability to interact between financial institutions, are being addressed in the new pilot program. The focus is on domestic use cases, but the technology shows the most promise in cross-border transactions due to high client demand. The pilot, involving major UK banks, will run until mid-2026 and test applications in remortgaging and digital asset settlement.

Read more at Yahoo Finance: UK banks press on with tokenised deposits after BoE stablecoin warning