Andrew Bailey has warned that bank-issued stablecoins could destabilize the financial system. The Bank of England is nonetheless cheering as Britain's largest banks tokenise their deposits and push them onto shared ledgers.
Both are tokenised bank liabilities. Both sit on a lender's balance sheet. The difference the central bank cares about is where the money can travel — and who controls it — which is why the same prudential regulator that kept a stablecoin issuance cap in place is now encouraging the deposit version.
Last week this column tracked bank-issued stablecoins and the USBDC conversation, where banks issue tokens that could circulate beyond their own deposit base. This week the focus shifts to something narrower and, in plumbing terms, more consequential: tokenised deposits, where the money never leaves the bank.
A private stablecoin can pull deposits out of the banking system. A bank-issued token, whatever it is called, cannot.
The UK move is the clearest example. Lloyds, NatWest and Barclays completed two mortgage transactions using tokenised deposits, moving money between institutions on blockchain rails, UK Finance told Reuters. That is the first time banks have moved this kind of money to each other rather than inside a single bank's own system.
A separate group including HSBC ran a simulated online marketplace purchase, where programmable deposits held the buyer's funds until goods were confirmed received. No real goods changed hands, but the mechanism is the point.
Jana Mackintosh, UK Finance's managing director for Payments and Innovation, said the design could lower fraud risk. She also noted the diplomatic effect: "In the last 12 months, other jurisdictions have been speaking to us in earnest about what we've done, trying to understand how they can now catch up," she said, citing counterparts in Europe.
The distinction that matters legally is simple. A tokenised deposit carries the same legal status as money in a bank account. A stablecoin is typically issued by a private company and takes money out of the banking system, which raises the concerns about credit cost and monetary sovereignty that the BoE has been repeating for two years.
That framing explains why Canada moved so quickly. Six banks — BMO, CIBC, National Bank of Canada, RBC, Scotiabank and TD — are jointly developing a CAD-denominated tokenised deposit system for interbank transfers, with the aim of faster, programmable payments and a later connection to broader digital-asset rails.
The trigger was regulatory rather than technological. On 10 September, Canada's Office of the Superintendent of Financial Institutions said tokenised deposits are legally indistinguishable from traditional deposits, and that the technology underlying a product does not determine its legal nature. It remains a liability of the bank.
That single clarification removed the ambiguity that had kept individual bank pilots isolated. A shared interbank standard solves a specific friction: today, a customer payment and the separate interbank settlement behind it are two different processes. One ledger could collapse them.
Canada's parallel framework is worth keeping straight. The Stablecoin Act passed in March under Bill C15 covers fiat-backed stablecoins issued by non-financial institutions, requiring registration with the Bank of Canada, 1:1 reserves in high-quality liquid assets, and redemption at par, with the regime due to take effect in 2027. Bank-issued stablecoins are excluded because banks are already regulated. Deposits and stablecoins stay in separate boxes.
Taiwan is the third leg, and here the headline overstates the reality. The Financial Supervisory Commission announced on 22 September that banks may apply to pilot deposit token business, with Taishin Bank the first to express interest. But the Banking Bureau was explicit that initial trials would cover only a bank's own clearing and settlement — cross-bank clearing is not part of the first phase.
That is the tension worth holding onto. The story is being told as interbank rails going global, and in the UK and Canada it genuinely is interbank. In Taiwan, the regulator has opened a door that stops short of the thing that makes the UK trial notable.
The FSC's requirements also show how much of this is still accounting work rather than cryptography. Applicants must detail the pilot's scope, issuance and redemption flows, how the deposit ledger reconciles against the deposit book, the technical architecture and key controls, and what happens to customer funds if the pilot ends.
Then there is the layer nobody watching token prices notices. On 24 September, IBM announced a beta connection between its Digital Asset Haven platform and Swift's shared ledger, using an ISO 20022 messaging adapter that translates standard payment instructions into tokenised deposit transfers. Seventeen pilot institutions are involved.
The design detail is that banks keep their security keys inside their own controlled environment, and IBM also launched a separate on-premises beta so regulated clients can run Haven inside IBM Z or LinuxONE data centres rather than a public cloud. That is the sell: standard messaging, bank-held keys, no new counterparty.
Read the fine print, and the "new rails" framing weakens. Participating institutions can move tokenised deposits around the clock ahead of final settlement, but final settlement still runs through existing mechanisms, including real-time gross settlement systems. The ledger moves value earlier. It does not replace the settlement layer underneath.
That matters for the competitive story. The case that tokenised deposits beat stablecoins in settlement uses — property, securities, cross-border — rests on banks offering blockchain speed without surrendering the deposit franchise. If the ledger is only a pre-settlement messaging and netting layer, the efficiency gain is real but smaller than the headlines imply.
The US is not absent. The Clearing House, a banking association and payments company, announced its own interbank tokenised deposit project in June, which puts the largest American banks on the same architectural path.
The near-term test is not another pilot. It is whether the UK project converts into a company with a rulebook and a governing framework, and whether the three digital bonds planned for the first quarter of 2027 actually trade and settle using tokenised deposits. Bonds settle with real money against real assets, which is where pilots either graduate or stall.
The second test is whether Canada's six-bank platform opens to other deposit-taking institutions, as the banks have said is the long-term intent. Interbank networks are only useful at scale.
The third is what Taiwan's self-clearing phase becomes once the FSC finishes its virtual asset service law — nine sub-laws are due for public hearing in October, with a draft pre-announced around November or December.
For anyone holding this as a crypto thesis, the honest read is that tokenised deposits are a defensive product. Banks are not adopting blockchain to join an open network. They are adopting it so their deposits can move at the speed of the stablecoins competing for the same settlement flows, while the liability stays exactly where it is.
Which is why the BoE's apparent contradiction is not a contradiction at all. A private stablecoin can pull deposits out of the banking system. A bank-issued token, whatever it is called, cannot. The Bank is not picking a technology. It is picking a balance sheet.