Daily News 19

Tag: Tokenized deposits

  • Barclays, HSBC, Lloyds and Other UK Banks Test Tokenized Deposits in First Live Customer Transactions

    Barclays, HSBC, Lloyds and Other UK Banks Test Tokenized Deposits in First Live Customer Transactions

    Key Highlights

    • Seven major UK banks—including Barclays, HSBC UK, Lloyds, Monzo, Nationwide, NatWest, and Santander—executed the first live customer transactions using tokenized sterling deposits through the Great British Tokenised Deposit initiative.
    • The pilots covered two remortgage completions and a consumer marketplace purchase, demonstrating automated fund locking and release that reduces settlement delays and counterparty risk.
    • Future phases aim to connect tokenized deposits with digital assets and test delivery-versus-payment-versus-reserves settlement on the Quant-developed GBTD platform.

    UK Banks Complete First Live Tokenized Deposit Transactions

    Britain’s largest retail and commercial banks have moved tokenized sterling deposits from concept to production, processing live customer payments through a shared industry platform. The milestone, disclosed in a September 24 statement, marks the first time programmable commercial bank money has been used for genuine retail transactions in the United Kingdom. The activity was coordinated under the Great British Tokenised Deposit (GBTD) initiative, convened by the trade association UK Finance, and involved a consortium of seven institutions: Barclays, HSBC UK, Lloyds Banking Group, Monzo, Nationwide Building Society, NatWest Group, and Santander UK.

    Remortgage and Marketplace Pilots Demonstrate Programmable Benefits

    The initial pilots focused on two high-value remortgage completions and a single consumer-to-consumer marketplace purchase. In the remortgage scenarios, funds were programmatically locked at the outset and released automatically only when legal completion was confirmed, eliminating the manual coordination that typically introduces settlement latency. Notably, customers continued to earn interest on their deposits during the pre-completion period, preserving the economic characteristics of a traditional bank account. For the marketplace transaction, the buyer’s funds remained immobilized until the goods were physically received, illustrating how conditional payment logic can mitigate counterparty risk in peer-to-peer commerce.

    Quant-Built Platform Provides Shared Infrastructure

    All transactions were executed on the GBTD platform, developed by enterprise blockchain firm Quant to serve as common infrastructure for tokenized commercial bank money. The architecture is designed to allow multiple issuers to operate interoperable tokenized deposits on a single network while maintaining each bank’s independent ledger and regulatory obligations. Participants emphasized that the model retains the trust, deposit protections, and regulatory framework associated with conventional sterling deposits, distinguishing it from stablecoins or crypto-assets that operate outside the commercial banking perimeter.

    Why This Matters

    The successful live trials represent a significant step toward the Bank of England’s broader exploration of wholesale and retail central bank digital currency (CBDC) coexistence with private-sector innovation. By proving that tokenized deposits can settle real-world obligations—such as property completions and e-commerce escrow—without sacrificing deposit insurance or interest accrual, the GBTD initiative addresses a critical gap in the digital money debate. The next phase, which will link tokenized deposits to digital asset settlement and test delivery-versus-payment-versus-reserves (DvPvR) mechanics, could lay the groundwork for instantaneous, atomic settlement of tokenized securities, foreign exchange, and syndicated loan facilities, potentially reducing systemic counterparty exposure across UK financial markets.

    Frequently Asked Questions

    What is the Great British Tokenised Deposit (GBTD) initiative?
    GBTD is an industry-led program convened by UK Finance that enables participating UK banks to issue, transfer, and settle tokenized sterling deposits on a shared platform developed by Quant. It aims to bring the functionality of programmable money to commercial bank deposits while preserving existing regulatory protections.
    Which banks participated in the first live transactions?
    The seven participating institutions are Barclays, HSBC UK, Lloyds Banking Group, Monzo, Nationwide Building Society, NatWest Group, and Santander UK.
    How do tokenized deposits differ from stablecoins?
    Tokenized deposits are liabilities of regulated commercial banks, carry standard deposit insurance protections, and exist within the existing monetary and regulatory framework. Stablecoins are typically issued by non-bank entities, may not offer deposit insurance, and operate under different regulatory regimes.
  • Canada’s ‘Big Six’ Banks to Launch Interbank Tokenized Deposit Initiative

    Canada’s ‘Big Six’ Banks to Launch Interbank Tokenized Deposit Initiative

    Key Highlights

    • Canada’s six largest banks have joined forces to explore a shared tokenized deposit network, keeping customer funds within the regulated banking system while enabling 24/7 programmable payments.
    • The initiative builds on Project Samara, where the Bank of Canada, RBC, and TD successfully issued, traded, and settled a 100 million Canadian dollar bond on a distributed ledger using tokenized wholesale Canadian dollars.
    • Canada is simultaneously advancing a regulated digital Canadian dollar backed by Shopify and the National Bank of Canada, signaling a dual-track approach to blockchain-based money.

    Canada’s Big Six Banks Unite on Tokenized Deposit Framework

    Canada’s six largest lenders have launched a collaborative effort to design a shared infrastructure for tokenized deposits, marking the country’s most concerted push yet to bring commercial bank money onto blockchain rails. The project aims to create a common model where digital representations of existing bank deposits—not separately issued stablecoins—can move programmatically around the clock while remaining fully inside the regulated banking perimeter. Participants include Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal, Scotiabank, Canadian Imperial Bank of Commerce, and National Bank of Canada, collectively representing the vast majority of the country’s banking assets.

    Distinguishing Tokenized Deposits from Stablecoins

    Unlike stablecoins issued by crypto-native firms, tokenized deposits are digital twins of money already held at a bank, carrying the same regulatory safeguards, deposit insurance eligibility, and central bank backing. A shared system would allow Canadian banks to test 24/7 programmable payments—such as instant settlement of securities trades or automated supply-chain finance—without fragmenting liquidity across proprietary platforms or ceding Canadian-dollar activity on blockchain networks to unregulated stablecoin issuers. The lenders have not yet committed to issuing a tokenized deposit, but the working group signals intent to shape the standards before the market does.

    Building on Project Samara’s Wholesale Success

    The retail-focused deposit initiative follows a successful wholesale experiment. In March, the Bank of Canada, RBC, and TD completed Project Samara, which issued, traded, and settled a 100 million Canadian dollar (roughly $71 million) bond on a distributed ledger using tokenized wholesale central bank money. That test proved that core capital markets functions—issuance, secondary trading, and delivery-versus-payment settlement—can operate on shared ledger infrastructure with atomic finality. The new six-bank effort extends that logic to commercial bank money, targeting the far larger universe of everyday corporate and consumer payments.

    Global Race Intensifies as Swift Enters Cross-Border Arena

    Canada’s move mirrors accelerating efforts abroad. In the United States, regional lenders are building a shared tokenized-deposit network while JPMorgan Chase, Citigroup, and Wells Fargo have each pursued institutional offerings such as JPM Coin and Citi Token Services. Meanwhile, Swift recently began testing tokenized deposits for 24/7 cross-border payments with banks across six continents, aiming to solve the time-zone mismatch that currently delays international settlements. A Canadian interoperable layer could eventually plug into similar global networks, positioning the loonie for frictionless programmable flows worldwide.

    Why This Matters

    The convergence of three parallel tracks—wholesale central bank money via Project Samara, retail tokenized deposits via the Big Six consortium, and a regulated digital Canadian dollar backed by Shopify and National Bank—suggests Canada is methodically constructing a full-stack blockchain monetary architecture. By keeping each layer inside the regulatory perimeter, policymakers aim to capture the efficiency gains of programmable money—atomic settlement, smart-contract automation, round-the-clock availability—while preserving financial stability, consumer protection, and monetary sovereignty. The outcome will likely influence how other mid-sized reserve-currency jurisdictions design their own digital money frameworks.

    Frequently Asked Questions

    What is the difference between a tokenized deposit and a stablecoin?

    A tokenized deposit is a digital representation of money already held in a regulated bank account, carrying the same legal status, deposit insurance, and central bank backing as the underlying funds. A stablecoin is typically issued by a non-bank entity and backed by reserve assets that may include commercial paper, treasury bills, or other instruments, with varying regulatory oversight.

    Which banks are participating in the Canadian tokenized deposit initiative?

    The six participants are Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal, Scotiabank, Canadian Imperial Bank of Commerce, and National Bank of Canada—collectively known as Canada’s “Big Six” banks.

    Has any Canadian bank already launched a tokenized deposit for customers?

    No. The current project is an exploratory consortium to design a common model; the lenders have not committed to issuing a tokenized deposit product at this stage.

  • Why Wall Street Giants Are Building Tokenized Money for Institutions, Not Retail Investors

    Why Wall Street Giants Are Building Tokenized Money for Institutions, Not Retail Investors

    Key Highlights

    • Major financial institutions are simultaneously operating tokenized deposits, regulated stablecoins, and traditional correspondent accounts on separate infrastructure, creating operational complexity.
    • Fragmented liquidity across multiple networks multiplies capital inefficiency, with idle funds locked on five networks representing five times the inefficiency of a single pool.
    • Privacy and interoperability remain critical barriers: banks cannot expose client transaction data on public blockchains, while private blockchain bridges risk data leakage.

    The Multi-System Challenge Facing Treasury Desks

    Treasury operations at leading financial institutions are contending with a fragmented infrastructure landscape. According to Jerald David, CEO of Lynq Network, major banks are juggling three distinct systems for the same fundamental purpose: moving money. A single institution may run a JPMorgan tokenized deposit for one client, a regulated stablecoin for another, and a conventional correspondent account for a third. While the economic rationale for each transfer remains identical, the underlying rails differ entirely, forcing treasury desks to maintain parallel operational workflows.

    Tokenized Deposits vs. Stablecoins: Key Distinctions

    The distinction between tokenized deposits and stablecoins carries significant regulatory and functional implications. Unlike a stablecoin, a tokenized deposit remains a direct claim on the issuing bank. This structure enables it to bear interest, remain within the regulated banking perimeter, and potentially be programmed to settle against tokenized assets. The core question, as David frames it, is whether banks can deliver these benefits to consumers while preserving privacy, compliance, and control over who holds the deposit.

    Regulatory Advantages of Bank-Issued Tokenized Deposits

    Monument, highlighted by Bhandari, holds a banking licence that stablecoin issuers lack, permitting it to pay interest on deposits. The firm plans to launch tokenized savings accounts that earn yield—a capability unavailable to non-bank stablecoin operators. This regulatory foothold positions licensed institutions to offer interest-bearing, programmable deposit tokens that combine the efficiency of blockchain settlement with the consumer protections and yield generation of traditional banking.

    Privacy and Interoperability Hurdles on Public Infrastructure

    Public blockchain infrastructure presents a separate challenge for regulated entities. Fahmi Syed, President of the Midnight Foundation, emphasized that banks cannot expose clients’ transaction data and commercial relationships on transparent ledgers. Citibank and JPMorgan have recognized this constraint internally. Syed articulated the interoperability dilemma directly: “Once you create a private blockchain, how do you then speak to another private blockchain? You then have to use a bridge or some other mechanism, and at that point, you have data leakage.” This tension between privacy-preserving private networks and the need for cross-chain settlement remains unresolved.

    Why This Matters

    The convergence of tokenized deposits, stablecoins, and correspondent banking on disparate rails reflects a broader transition in wholesale and retail payments. As major banks experiment with tokenized liabilities, the industry faces a structural choice: consolidate liquidity onto interoperable standards or accept persistent fragmentation that inflates capital costs and operational risk. Regulatory clarity around interest-bearing tokenized deposits could accelerate adoption, but only if privacy-preserving interoperability solutions—such as zero-knowledge proofs or permissioned cross-chain protocols—mature sufficiently to satisfy compliance requirements. The next 12 to 18 months will likely determine whether bank-issued tokenized deposits become a mainstream payments rail or remain niche instruments constrained by infrastructure silos.

    Frequently Asked Questions

    How does a tokenized deposit differ from a stablecoin?

    A tokenized deposit is a direct claim on the issuing bank, remains within the regulated banking system, and can bear interest. A stablecoin is typically issued by a non-bank entity, backed by reserves, and does not carry a bank credit claim or interest-bearing capability.

    Why is fragmented liquidity across multiple networks a problem for clients?

    Idle liquidity locked across five separate networks creates five times the capital inefficiency compared to a single unified pool, forcing clients to allocate more capital to achieve the same operational coverage.

    What is the main barrier to using public blockchains for bank tokenized deposits?

    Public blockchains expose transaction data and commercial relationships, violating client privacy and regulatory obligations. Private blockchains solve privacy but create interoperability challenges, as bridges between them risk data leakage.

  • From Hawala to SWIFT: Inside the 1,000-Year Battle to Move Money Safely

    From Hawala to SWIFT: Inside the 1,000-Year Battle to Move Money Safely

    For a thousand years, the financial industry has sought ways to move wealth virtually. Yet each time innovators develop a faster or more secure method of transferring capital, malicious actors respond with new and sometimes highly sophisticated attack vectors.

    For more than 50 years, the messaging network created by the Society for Worldwide Interbank Financial Telecommunications (Swift) has served as the dominant infrastructure for cross-border settlement, routing approximately $5 trillion each day. However, the bank-owned organization is under growing pressure to evolve as it works to increase transaction speed, lower costs and compete with an expanding range of blockchain-based alternatives.

    In recent years, stablecoins and tokenized deposits have emerged as potential “SWIFT killers”, a phrase coined in a 2017 Brave New Coin analysis of Ripple, the blockchain network designed to facilitate cross-border transactions.

    Swift took almost nine years to respond. Last month, it unveiled a blockchain ledger. Soon afterward, HSBC and Standard Chartered completed the first live transaction using the system, settling it in seconds rather than days.

    Swift’s potential inspiration

    In the 8th century, Islamic merchants transporting goods between Baghdad, Cairo and the Indian subcontinent faced a serious security problem. Moving gold physically was dangerous because bandits were waiting to target travelers, and even heavily armed escorts could not fully solve the risk.

    Source: cryptonews.net