Barclays, Citi are among banks testing tokenised deposits in UK

INDUSTRY body UK Finance is expanding its pilot of an experimental shared ledger to track banking payments, hoping to join some of the dots in the nascent world of digital assets.

Banks including Barclays, Lloyds Banking Group and Citigroup as well as card networks Mastercard and Visa are involved in this phase of the pilot, UK Finance said on Monday (Apr 15).

The trial is the latest stepping stone to creating a viable commercial system that all banks can use for tokenised deposits and securities. With more assets recorded as a token on a unified blockchain, the goal is to make transactions across borders and systems easier and faster, and to reduce the chance of error and fraud.

The latest pilot started in February, according to Gilbert Verdian, chief executive officer at Quant, which creates interoperable blockchain networks and is providing technology for the pilot.

Firms are expected to use the trial platform for two to three years, before the technology is implemented commercially, Verdian said. The results of the pilot will be published in August. Fintech startups and technology companies will be able to join the programme in July to start testing new products based on tokenised commercial bank money, he said.

Verdian said that businesses were keen to experiment with this technology more quickly than central banks can create their own digital currencies. “Banks see the need for programmable payments today. It is quite a game changer for them because business models can operate in a more efficient way because they are not limited by the shackles of the current payment system.”

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Asset managers are also expected to use the pilot platform to tokenise their funds, he said. The system could also be used for settling mortgages using programmable funds.

The pilot is one of a handful of efforts chasing a similar goal. The Bank of International Settlements has launched multiple projects in recent years seeking to understand how tokenised forms of money such as central bank digital currencies would work in practice, most recently including a pilot with seven central banks on international payments. Meanwhile, financial regulators in the UK, Singapore, Japan and Switzerland teamed up last year to explore fund and asset tokenisation use cases.

UK Finance, which has been developing the so-called Regulated Liability Network concept for over a year, said the ledger lets participants record, transfer and settle transactions across central bank money, commercial bank money and electronic money. BLOOMBERG