Barclays, Citi Test UK Tokenized Deposits, Eyeing Digital Future

Barclays and Citi test tokenized deposits in UK, aiming to revolutionize banking with blockchain technology.

By Max Weldon

4/15, 17:35 EDT
Bitcoin / U.S. dollar
Barclays PLC
Citigroup, Inc.
Mastercard Incorporated

Key Takeaway

  • Barclays, Citi, and other major banks are testing tokenized deposits in the UK to streamline cross-border transactions and reduce fraud.
  • The pilot aims for a commercial launch after 2-3 years of trials, with fintechs joining in July for further product testing.
  • This initiative is part of global efforts to explore digital currencies and tokenization, including projects by the Bank of International Settlements.

Pioneering the Future of Banking with Blockchain

The financial industry is on the cusp of a revolution, with UK Finance spearheading an experimental shared ledger to track banking payments, signaling a significant leap towards the integration of digital assets into mainstream banking. This initiative sees heavyweight participants such as Barclays Plc, Lloyds Banking Group Plc, Citigroup Inc., alongside card giants Mastercard Inc. and Visa Inc., laying the groundwork for a future where transactions are not just digital but are also secure, swift, and seamless across borders.

The essence of this pilot, which commenced in February under the technological guidance of Quant, is to forge a viable commercial system that leverages tokenized deposits and securities. The ambition is to streamline transactions, making them more efficient while minimizing errors and fraud. Gilbert Verdian, CEO at Quant, highlighted the industry's eagerness to adopt programmable payments, underscoring the transformative potential of this technology to liberate businesses from the constraints of current payment systems.

Tokenization: A New Era of Financial Transactions

The pilot's scope extends beyond mere payment tracking; it is a bold step towards the tokenization of assets, a process that promises to redefine how we perceive and handle financial assets. By recording assets as tokens on a unified blockchain, the initiative aims to facilitate smoother transactions across different jurisdictions and financial systems. This move could significantly impact asset managers and the real estate sector, offering a more streamlined approach to handling funds and settling mortgages through programmable funds.

The UK's exploration into a retail digital pound backed by commercial bank money or tokenized deposits is particularly noteworthy. This endeavor, part of the broader Regulated Liability Network (RLN) concept, is not just about innovation but also about maintaining the uniformity and functionality of money in the face of emerging digital currencies. The RLN's commitment to making regulated money smarter and more efficient is a testament to the potential of blockchain technology to enhance the financial landscape.

Global Collaboration and Regulatory Considerations

This initiative is not in isolation. It aligns with global efforts, such as those by the Bank of International Settlements and financial regulators from the UK, Singapore, Japan, and Switzerland, to understand and harness the benefits of tokenized forms of money. The collaborative nature of these projects, coupled with the involvement of regulatory bodies, underscores the importance of a regulated approach to digital assets and currencies.

The legal and regulatory framework surrounding these innovations is crucial. The RLN's operation within the financial market utility regulatory framework established by the Dodd-Frank Act, and its compliance with state and federal laws, including Article 4A of the Uniform Commercial Code, highlights the meticulous approach taken to ensure that these advancements are both innovative and secure.

Street Views

  • Gilbert Verdian, CEO of Quant (Bullish on digital asset technology):

    "Banks see the need for programmable payments today. It’s 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."