Stablecoins vs Tokenised Deposits: Which Will Shape the Future of UK Finance?
UK Finance has announced plans to run a tokenised deposit pilot with some of the UK’s largest banks, which is set to run until mid-2026. The pilot will also assess applications of tokenised deposits in the remortgage process and in digital asset settlement.
Tokenised deposits differ from stablecoins as they are traditional bank deposits represented digitally on a distributed ledger, and each token also corresponds to a pound held in a bank account. Issued by regulated banks, they remain backed by pre-existing deposits, and operate within existing banking regulations. In contrast, stablecoins can be issued by private companies and backed by fiat currency, commodities or cryptocurrencies; not being linked to specific deposits.
This pilot coincides with a recent warning from Andrew Bailey, Governor of the Bank of England; who in July, warned that privately issued stablecoins could threaten financial stability if they divert deposits away from the banking system. As such, do tokenised deposits have a major role to play in a safer financial system?
Regulatory Backdrop
The Bank of England has repeatedly emphasised the risks posed by stablecoins: potential disruptions to credit creation, loss of bank deposits, and questions over redemption rights and systemic resilience. The primary challenge is that widespread use of stablecoins outside of the regulated banking sector could fragment money itself.
In this context, tokenised deposits are emerging as a potential compromise. They offer a way to harness the efficiencies of digital payments while keeping funds within the established banking system and under regulatory oversight.
Tokenised Deposit Pilot
Earlier this September, UK Finance announced the launch of a 10-month pilot for sterling tokenised deposits (GBTD), with participation from six major banks including HSBC, Barclays, Lloyds, and Santander. Technology partners such as Quant Network are also backing the effort.
The pilot will test a range of use cases including person-to-person transfers in digital marketplaces to mortgage refinancing and asset settlement. The BoE and the Financial Conduct Authority (FCA) are observing developments closely, with outcomes expected to shape the UK’s regulatory approach ahead of stablecoin rules by late 2026.
Why the Move Towards Tokenised Deposits?
From a regulatory and market perspective, tokenised deposits provide several advantages including:
- Regulatory Alignment - Unlike stablecoins or privately issued tokens, tokenised deposits are simply commercial bank money in digital form. Thus, they stay within the existing regulated framework of deposits, balance sheets, capital liquidity, and depositor protection. Furthermore, due to being deposits, they inherit the same legal treatment as ownership rights and bankruptcy protection, without the need of establishing new legislation.
- Operational Efficiency - One key factor driving the implementation of tokenised deposits is that it can enable near instant, atomic settlement across a multitude of asset classes such as securities and capital markets, supply chain, cross-border payments, and mortgages with land registry. Additionally, this reduces ’trapped liquidity‘ and reconciliations, and leads to faster capital turnover. Payments can also be programmable, by issuing rules where deposits are only released on delivery, or refunds are issued automatically; thereby cutting manual errors and fraud.
- Reduced Systemic Risk - Unlike stablecoins, they do not draw liquidity away from the banking system as they remain on bank balance sheets, under prudential oversight. With tokenised deposits, all parties see the same real-time ledger, meaning exposure is visible instantly. This allows regulators to spot stress points early and reduce the chances of a systemic crisis from occurring.
Despite their appeal, many questions still remain. Interoperability, for instance, is questioned on whether tokenised deposits issued by different banks work seamlessly with one another, or will it be a closed system.
In regard to regulations, how will cross-border usage be overseen and what rules will ensure transactions are truly final once settled? Consumers may view tokenised deposits as no different from money in the banking app, meaning adoption may become slow without clear added benefits. Some would also argue whether these developments reflect genuine innovation, or if it is a defensive move to redirect momentum away from non-bank stablecoin issuers.
The Transitional Moment
The Bank of England’s stance suggests that privately issued stablecoins will face significant regulatory constraints. Tokenised deposits may therefore become a preferred method for digital money within the UK by preserving the stability of bank money while enabling many of the efficiencies promised by distributed ledger technology. While the UK’s Financial Conduct Authority is not expected to finalise stablecoin regulation until the end of 2026, banks now have the opportunity to experiment with tokenised deposits within existing regulations and build on new technologies to deliver faster and more efficient forms of money.
Many large lenders are examining and investing in both opportunities of stablecoins and tokenised deposits. Citi’s CEO, Jane Fraser was quoted in July 2025 as saying that while stablecoins present an interesting opportunity for Citi, the imminent priority is still tokenised deposits. This indicates that market leaders are positioning themselves to engage in open innovation as the market landscape is still ultimately uncertain, with both solutions serving slightly different purposes.
The next few years will be very divisive in whether tokenised deposits become the foundation of digital money in the UK or remain a niche alternative; overshadowed by other forms of digital currency. If the pilots show clear efficiency gains, regulators may encourage broader adoption; potentially integrating them with instant payments and settlement systems.
If doubts around interoperability, security, or consumer uptake for tokenised deposits persist, they could remain a niche tool rather than a mainstream innovation. Moreover, the debate over stablecoins has shifted the conversation. The question is no longer whether money becomes tokenised, but who will control the process, and what risks society is willing to accept.
Shane is a Research Analyst at Juniper Research, specialising in fintech trends, market forecasting and competitive analysis. He contributes to in-depth reports and strategic insights across digital banking, payments and financial inclusion. His work supports clients navigate emerging opportunities and regulatory challenges in the evolving fintech landscape.
Latest research, whitepapers & press releases
-
ReportOctober 2025Telecoms & Connectivity
Travel SIMs & eSIMs Market: 2025-2030
Our comprehensive Travel eSIMs research suite comprises detailed assessment of a market undergoing rapid growth. It provides insight into how travel eSIM providers can differentiate their services to maximise success in the market over the next two years.
VIEW -
ReportOctober 2025IoT & Emerging Technology
Direct to Satellite Market: 2025-2030
Juniper Research’s Direct to Satellite research suite provides satellite providers, investors, and partners, such as Mobile Network Operators, with an extensive analysis and insights into the direct to satellite market.
VIEW -
ReportSeptember 2025Fintech & Payments
Instant Payments Market: 2025-2030
Juniper Research’s Instant Payments research suite provides a wide-ranging and strategic analysis of this market; enabling stakeholders - from banks, infrastructure providers, regulators, and businesses - to understand future growth, key trends, and the competitive environment.
VIEW -
ReportSeptember 2025Fintech & Payments
Anti-money Laundering Systems Market: 2025-2030
Our AML Systems research suite provides a detailed and insightful analysis of this evolving market; enabling stakeholders from financial institutions, law enforcement agencies, regulatory bodies and technology vendors to understand future growth, key trends, and the competitive environment.
VIEW -
ReportSeptember 2025Fintech & Payments
A2A Payments Market: 2025-2030
Our A2A Payments research suite provides detailed analysis of this rapidly changing market; enabling A2A payments service providers to gain an understanding of key payment trends and challenges, potential growth opportunities, and the competitive environment.
VIEW -
ReportSeptember 2025Telecoms & Connectivity
Mobile Messaging Fraud Prevention Market: 2025-2030
Our Mobile Messaging Fraud Prevention research suite provides a detailed and insightful analysis of a market set for significant disruption over the next five years. It enables stakeholders from mobile operators, enterprises, and mobile messaging fraud prevention vendors to understand how the market for mobile messaging fraud will evolve, as well as the impact of AI, RCS, and the evolving competitive environment.
VIEW
-
WhitepaperOctober 2025IoT & Emerging Technology
Beam Me Up: The Direct to Satellite Revolution
Our complimentary whitepaper, Beam Me Up: The Direct to Satellite Revolution, evaluates the future key services that satellite providers must offer in the direct to satellite market.
VIEW -
WhitepaperSeptember 2025Fintech & Payments
Core Banking Transformation - A Strategic Conversation with SAP Fioneer
Core banking transformation is no longer optional, as regulatory change, rising compliance costs, and shifting customer expectations make legacy systems unsustainable. Anna Koritz, Global Head of Transaction Banking at SAP Fioneer, shares how banks can overcome cultural and technical hurdles and why SAP Fioneer’s modular, cloud-ready approach enables confident modernisation.
VIEW -
WhitepaperSeptember 2025Fintech & Payments
From Detection to Prevention: The Next Era of Anti-money Laundering
Our complimentary whitepaper, From Detection to Prevention: The Next Era of Anti-money Laundering, examines the state of the AML systems market; considering the impact that a changing regulatory environment and a growing number of use cases is having on the market. Additionally, it includes a forecast summary of the total value of the AML systems market in 2030.
VIEW -
WhitepaperSeptember 2025Fintech & Payments
3 Key Trends Driving Instant Payments
Our complimentary whitepaper, 3 Key Trends Driving Instant Payments, assesses how key trends are driving the evolution of the instant payments market, and which challenges these resolve. Additionally, it includes a forecast summary of the global transaction values via instant payment schemes by 2029.
VIEW -
WhitepaperSeptember 2025Fintech & Payments
Ascending-to-Ailing: The Deceleration of A2A Adoption
Our complimentary whitepaper, Ascending-to-Ailing: The Deceleration of A2A Adoption, examines the state of the A2A payments market; considering the impact of this payment method and how it is shaping the modern payments landscape through lower fees and enriched user experience.
VIEW -
WhitepaperSeptember 2025Telecoms & Connectivity
RCS Fraud: Emerging Threats in Next-gen Messaging
Our complimentary whitepaper, RCS Fraud: Emerging Threats in Next-gen Messaging, examines the future of the messaging fraud prevention market, with a particular focus on the latest trends within RCS Business Messaging (RBM). Additionally, it includes a forecast summary of the total cost of fraud over RBM to subscribers in 2030.
VIEW
-
IoT & Emerging Technology
Satellite Broadband Market to Break $20 Billion by 2030, as Satellite Constellations Disrupt Established Services
October 2025 -
Fintech & Payments
Subscription Economy to Reach $1.2 Trillion by 2030 Globally, Despite Increasing Subscription Fatigue
October 2025 -
Fintech & Payments
AML Systems Market to Surpass $75 Billion by 2030 Globally, With LexisNexis Risk Solutions, Oracle, and Experian Leading the Defence
September 2025 -
Fintech & Payments
Instant Payments to Exceed $110 Trillion by 2029 Globally, Accelerated by European Regulation & FedNow Impact
September 2025 -
Fintech & Payments
B2B Payments to Hit $224 Trillion by 2030 Globally, Driven by Emerging Market Expansion
September 2025 -
Fintech & Payments
A2A Transaction Value to Reach $195 Trillion in 2030 Globally, Driven by Advanced Value-added Services
September 2025