Key Takeaways
- The Bank of England is making tokenized bank deposits, not stablecoins, the centerpiece of its digital finance strategy.
- Governor Andrew Bailey has softened his stance on stablecoins while maintaining that tokenization is the more valuable innovation.
- Top U.K. banks including HSBC, NatWest, Lloyds, and Barclays are piloting tokenized deposits for digital payments and mortgage refinancing through 2026.
Britain is placing tokenization at the core of its digital finance strategy, as the Bank of England (BoE) moves to limit the use of stablecoins while encouraging banks to experiment with tokenized deposits.
The shift follows a softening of BoE Governor Andrew Bailey’s stance on stablecoins after he claimed tokenizing traditional deposits offered greater value than stablecoins.
BoE Plans Stablecoin Limits
The BoE is preparing to cap stablecoin holdings for individuals and businesses to strengthen oversight of digital money and protect financial stability.
Under draft proposals, individuals could hold between £10,000 and £20,000 ($13,400–$26,800) in stablecoins, while companies could hold up to £10 million.
However, the central bank is now expected to grant exemptions for certain crypto firms, such as exchanges and custodians, marking a softer approach after pushback from the industry, Bloomberg reported.
The BoE also plans to adjust its Digital Securities Sandbox, a controlled testing environment for blockchain-based issuance and trading, to allow limited use of regulated stablecoins for settlement.
The changes would initially permit firms to use non-sterling stablecoins in sandbox trials, giving the central bank a chance to observe real-world use cases as it develops its policy , the report said, citing people familiar with the matter.
Tokenization Over Stablecoins
Governor Andrew Bailey, long a skeptic of stablecoins, previously described tokenization as a “more valuable innovation” over stablecoins because it keeps money within the regulated banking system.
In July, Bailey said he was “not against stablecoins” but struggled to “see the need for them.”
However, on Oct. 1, writing in the Financial Times, he acknowledged that it would be “wrong to be against stablecoins as a matter of principle,” noting their potential to “drive innovation in payment systems both at home and across borders.”
Despite this softening tone and moderation in the BoE’s stance, the broader approach still seems to be pursuing tokenisation as a frontrunner.
Banks Lead Tokenization Pilot
Leading U.K. banks, including HSBC, NatWest, and Lloyds, have launched a pilot program using tokenized deposits for online marketplace payments.
The initiative will run until mid-2026 and explore applications in mortgage refinancing.
HSBC’s global head of payments solutions, Manish Kohli, said the project aims to make tokenized deposits interoperable between banks.
Industry body UK Finance recently noted that tokenized deposits could achieve adoption more quickly than stablecoins, as they are issued by regulated banks with large depositor bases.
“Tokenized deposits are likely to be the way that a much wider tranche of financial institutions get involved in the digital asset space,” wrote William Lee, an analyst at UK Finance.
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Kurt Robson is a London-based reporter at CCN, specialising in the fast-moving worlds of crypto and emerging technology. He began his career covering local news in Cornwall after graduating from Falmouth University with First Class Honours in Journalism. There, he cut his teeth on everything from council meetings to missing swans.
He quickly rose through the ranks to become a frontline journalist at several of the UK’s leading national newspapers. Over the years, he has interviewed musicians and celebrities, reported from courtrooms and crime scenes, and secured multiple front-page exclusives.
Following the upheaval of the COVID-19 pandemic, Kurt shifted his focus to technology journalism—just ahead of the AI boom. With a natural curiosity and a trained eye for emerging trends, he has found a new rhythm in reporting on innovation.
At CCN, Kurt's work focuses on the cutting edge of crypto, blockchain, AI, and the evolving digital world. Drawing on his background in people-first reporting and his deep interest in disruptive tech, Kurt delivers stories that are insightful, entertaining, and human-centric.
