The concept of utilizing tokenized sterling deposits in everyday payment transactions in the UK has taken a leap forward.
UK Finance, the industry’s leading trade association, has initiated a live pilot project scheduled to run until mid-2026.
Quant, a technology firm based in London, has been chosen to construct the infrastructure for this
programmable money
system. The banking institutions collaborating in this pilot include prominent names such as HSBC, Lloyds, NatWest, Barclays, Nationwide, and Santander.
The pilot program will evaluate the use of tokenized deposits across three distinct scenarios:
-
Person-to-person marketplace payments, where smart contracts and escrow-like features can help minimize the risk of fraud and
deception. -
Remortgaging processes, designed to coordinate the release of funds and identity verification procedures among legal representatives
and mortgage lenders. -
Wholesale asset settlement, employing instant delivery-versus-payment (DvP) methods for the synchronized exchange of cash and
securities.
Previous research performed under the
UK Regulated Liability Network
(RLN) demonstrated legally binding DvP arrangements through automated synchronization of tokenized deposits, tokenized assets, and
central bank digital currency.
Programmable Money
The focus on tokenized deposits aligns with a deliberate strategy to promote innovation within the established banking system. Andrew
Bailey, Governor of the Bank of England, stated in July that he saw no justification for bank-issued or third-party stablecoins,
preferring the tokenization of deposits. The Financial Conduct Authority’s (FCA) stablecoin regulatory framework is expected to be
finalized towards the end of 2026.
The work conducted by UK Finance’s RLN also
indicated
that programmability can reduce payment failures, decrease fraudulent activities, and improve the efficiency of the home-buying process.
Quant has announced that it will supply the foundational programmable money layer necessary for live tokenized deposit transactions. This
layer will enable interoperability across diverse bank ledgers and the UK’s payment infrastructure, covering systems like RTGS/CHAPS,
Faster Payments, Open Banking APIs, and various tokenized-deposit platforms.
Quant’s
technology stack
includes Overledger, their interoperability platform, and PayScript for programmable payment logic. Documents describe how these components
allow conditional payments, atomic settlements, and the orchestration of transactions across different networks.
UK Finance’s RLN
documentation
outlines the cross-ledger design being developed within the pilot, which includes shared-ledger orchestration and fundamental features to
support programmability.
The long-term effects of this initiative are most apparent in the areas of fraud reduction, settlement costs, and improvements to
working-capital management. Authorized push payment (APP) scams and marketplace fraud remain the dominant forms of retail payment fraud in
the UK. Programmability facilitates the inclusion of conditions for funds release and the verification of counterparties to mitigate
these issues.
Pilot Impact and Mechanisms
UK Finance’s most recent annual
fraud data
revealed an increasing trend in both the number of fraud cases and associated financial losses leading into 2025. Remote purchase scams
and impersonation scams were specifically highlighted as prominent threats.
According to
Deloitte, surveys conducted with large banking institutions indicate that substantial cost savings are achievable once programmable money and
tokenization are deeply integrated into payment operations and corporate accounts payable systems.
The UK’s initiative to digitize sovereign debt, including a
pilot digital gilt instrument, is progressing in parallel. This effort complements bank tokenization, particularly if the finality of settlement is tested on the
blockchain.
| Mechanism | What changes with tokenised deposits | Illustrative range, next 12–24 months |
|---|---|---|
| Marketplace P2P payments | Conditional release and escrow-like logic reduce successful scam completion rates by controlling funds availability | 5–15% reduction in APP scam losses in flows adopting conditional release |
| Corporate payments ops | Embedded rules for cash application, invoice checks and cut-off scheduling reduce exceptions and reconciliation work | 5–10% lower internal processing cost per transaction at scale |
| Remortgaging completion | Synchronised funds and title updates cut idle time and reduce conveyancing fraud exposure | Hours to sub-day completion for funds movements in controlled pilots |
| Wholesale DvP settlement | Atomic settlement for cash and tokenised securities, shared liquidity management | T+0 in pilot environments, with staged liquidity controls |
| Policy and standards context | National roadmap for next-gen payments and digital markets supports bank-led digital money experiments | Regulatory deliverables mapped to 2025–26 work program |
Successful execution is contingent upon ensuring interoperability across various ledgers and payment systems, which is a key objective of
the pilot program. The RLN work of UK Finance details a multi-issuer platform and an orchestration layer designed to integrate with
different forms of currency and existing payment infrastructures.
The Head of Global Payments Solutions at HSBC stated that cross-border applications are currently seeing the highest demand from clients,
even though initial tests are domestically focused. He also noted that the potential for bank-to-bank interoperability remains limited
at this stage.
This initiative is also in alignment with the UK’s broader policy objectives. The
National Payments Vision
outlines a strategy for developing a reliable, next-generation payments ecosystem, built upon a clear regulatory framework and resilient
infrastructure.
In capital markets, the government and the Debt Management Office (DMO) are preparing a pilot program for a
digital gilt instrument, that aims to test the on-chain issuance and settlement of government debt within the Digital Securities Sandbox. At the European level,
the
ECB’s July 2025 progress report
reaffirms ongoing efforts focused on conditional payments and establishing the necessary rulebooks, particularly if banks are planning to
settle retail transactions in central bank digital currency in the future.
If the GBTD pilot successfully demonstrates shared programmability across retail and wholesale transactions, the initial real-world
implementations would target areas where programmable conditions and synchronized settlements offer the most value. This includes high-risk
P2P marketplace transactions, mortgage completions, and specific DvP asset settlements. Fraud controls and bank-to-bank interoperability
will be integrated from the outset.