When Barclays, HSBC UK, Lloyds, Monzo, Nationwide, NatWest, and Santander completed what has been described as the world's first interbank tokenized pound deposit customer transaction under the UK Finance-led "UK Tokenized Deposit (GBTD) Program," it appeared to be just an ordinary transfer moved onto the blockchain, but in essence, it marked a new frontier for the future of payments and settlement rights. The GBTD seeks to test whether tokenized deposits issued by licensed banks and bound by existing regulatory and deposit insurance frameworks can efficiently undertake roles in interbank settlement and everyday payments; meanwhile, outside the traditional system, the on-chain dollar network represented by Circle's USDC continues to expand rapidly. In a recent approximately 7-day window, approximately 10.1 billion USDC was issued, around 9.8 billion was redeemed, resulting in a net increase of about 300 million; the current total circulating supply has climbed to around 74.6 billion, corresponding to approximately 74.8 billion in reserves, further solidifying its status as a global on-chain dollar settlement pool. On one side, domestic tokenized deposits attempt to bring payment clearing back to banks' stronghold, and on the other, dollar tokens like USDC roll out a separate settlement track across multiple public chains. The long-term clash between the traditional banking system and on-chain dollars over who will dominate future payment and settlement orders is no longer just an abstract technical dispute but an ongoing game in real-time flow of funds.
The Seven Banks Unite: Tokenized Pounds Take Center Stage
On the opposite side of the rapidly expanding on-chain dollars, the UK has chosen to base its "home ground" on domestic deposits. The UK Tokenized Deposit Program (GBTD), led by UK Finance, brought together Barclays, HSBC UK, Lloyds, Monzo, Nationwide, NatWest, and Santander at the same table, not to conduct a loose industry seminar, but to test how to mint traditional pound deposits into tokens for interbank settlement and payments under unified rules. The GBTD resembles an "internal new track": the tokens still correspond to each bank's deposit liabilities, but they can quickly circulate between banks at the technical level, attempting to preserve the banking system's control over the pound payment network through blockchain settlement efficiency.
Within this framework, the seven banks recently completed a key transaction—described by participants as the "world's first" interbank tokenized pound deposit customer settlement. This is not a closed-door experimental transfer but an interbank payment occurring between different banks for real customers: funds are "put on-chain" in the form of tokenized deposits at one bank and settled with the recipient at another bank, compressing the traditional clearing task into a single atomic-level accounting action using tokenized pounds. According to a single source, the platform underpinning this pilot was built by Quant, with Ernst & Young providing project management and consulting support, but this technical stack and role division has yet to be corroborated by multiple parties; the officials have also not disclosed the project's launch year, complete technical architecture, or regulatory sandbox arrangements. In other words, the only contours currently known externally are that the seven banks have completed cross-bank, real customer-level settlements using tokenized pounds on the same platform, and whether this system can transition from a closed pilot to a scalable application acceptable to both regulators and the market will become a key variable in observing how the UK banking industry responds to on-chain settlement impacts.
Mortgage Transfer Experiment: Funds Locked Until Instant Delivery
In the GBTD testing environment, Lloyds, NatWest, and Barclays first deconstructed the traditional mortgage transfer process: when a customer decides to "move" their mortgage from one bank to another, the original and new banks do not complete the contract first and then arrange for funds to be transferred slowly, but each mints corresponding tokenized deposits on the platform, locking the required funds. Before the transaction is “completed,” this portion of locked tokens cannot be used for other purposes; once the contract conditions for the mortgage transfer are satisfied, the system automatically releases the tokenized deposits at both ends simultaneously, fulfilling the repayment of the old loan and the issuance of the new loan, either completely successful or fully rolled back, leaving no time difference of "contract first, money later" for the operations team.
This "funds locked first, automatically released upon completion" design transforms mortgage replacement into a programmable settlement instruction chain, amplifying the features of atomic settlement: counterparty risk is compressed within the conditions set by code, and reconciliation goes from post-hoc line-by-line verification to a one-time confirmation of the status of the same on-chain transaction. According to a single source, three banks including HSBC have also conducted point-to-point payment tests simulating online shopping on the same platform, locking and instantly settling a small retail payment using tokenized deposits, demonstrating that this model is not limited to large mortgages. Although the external observers currently cannot see the transaction scale, end customer types, or specific technical agreements related to these tests, the consistent atomic settlement logic being deliberately connected from mortgage transfers to “online shopping” serves as a crucial clue for the UK banks testing the real utility of tokenized deposits.
USDC Net Increase of 300 Million in Seven Days: On-Chain Dollars Continue to Attract Capital
The UK banks are also practicing with tokenized pounds in the sandbox while on the other end, the USDC dollar pool is quietly growing. According to industry media analysis of data disclosed by Circle, in the "past 7 days ending September 21 of a certain year," USDC issued approximately 10.1 billion, while around 9.8 billion was redeemed, resulting in a net increase of approximately 300 million; at the inventory level, the current total circulating supply of USDC is approximately 74.6 billion, with corresponding reserves of about 74.8 billion, demonstrating a persistent robust demand globally for dollar-denominated on-chain assets pushing this balance sheet higher.
More crucially, where this 74.8 billion dollars is placed matters. Disclosures show that around 41.2 billion dollars are allocated to overnight reverse repos, approximately 26.5 billion dollars are in U.S. Treasury bonds with maturities shorter than three months, another approximately 5.9 billion dollars are kept in deposit accounts at institutions recognized as systemically important financial institutions, with the remaining approximately 1.2 billion dollars in other bank deposits—this combination resembles a highly liquid money market fund rather than an ordinary bank deposit account. For on-chain users, USDC freely flows across multiple public chains, but it is underpinned by a pool of short-duration dollar assets, creating a completely alternative settlement and “deposit” option detached from a single country’s banking system. This expanding on-chain dollar channel becomes a crucial counterpoint the seven major UK banks cannot overlook as they attempt to reclaim discourse power with tokenized pounds.
Two Channels: Bank Deposit Tokenization vs. USDC
In the GBTD pilot, the seven UK banks have chosen not to convert customer funds into some kind of “new currency,” but to create an on-chain “passbook copy” from the existing pound deposits: tokenized deposits are essentially a digital representation of existing deposits, within the bank regulatory and deposit insurance framework, issued and redeemed by licensed banks. Lloyds, NatWest, and Barclays use it for mortgage transfers, locking in funds first and atomically releasing at the moment of completion; several banks, including HSBC, complete point-to-point payment settlements using it in simulated online shopping scenarios—all processes are accomplished within the regulated closed track of tokenized pound deposits, rather than relying on dollar tokens on public chains. For banks, this allows moving existing deposits onto a new technological track without creating an additional "proprietary on-chain currency" and aims to keep the central power over payment and settlement firmly within their familiar regulatory fences.
In contrast, USDC represents an entirely different channel: issued by Circle, supported by dollar reserves, freely transferrable across multiple public chains, resulting in a channel for dollar settlement and value storage independent of a single country's banking system. Within about 7 days ending on September 21 of a certain year, USDC issued approximately 10.1 billion, redeemed about 9.8 billion, with a net increase of about 300 million, totaling about 74.6 billion in circulation, with corresponding reserves of about 74.8 billion—a scale large enough to coexist parallelly with the foreign currency deposit pools of certain medium-sized national banking systems. The advancement of tokenized pound deposits by the seven major UK banks can be seen as a proactive response to the expansion of such on-chain dollars: on one side, there are domestic tokenized deposits bound by deposit insurance and local regulatory frameworks, and on the other, dollar assets that do not require local accounts, accessible with just an on-chain address. The two channels engage in a long-term tug-of-war over payment, settlement, and potential "deposit alternatives", determining which track users will prefer to stop their money on in the future.
The Battle for Settlement Rights: Can the UK Change the Game Rules?
This round of the GBTD pilot has made its direction sufficiently clear: within the deposit insurance and local regulatory framework, minting pound deposits into programmable, near-instant settlement tokenized positions to support interbank settlement and daily payments, moving the technological foundation of domestic currencies from traditional clearing systems onto the blockchain. With UK Finance leading and seven major banks jointly participating, alongside real or simulated scenario testing like interbank mortgage transfers and simulated online shopping, this is fundamentally validating a shared tokenized settlement infrastructure for the entire banking industry. In comparison, USDC has already circulated across multiple public chains, with a total of about 74.6 billion and corresponding reserves of about 74.8 billion, continuing to expand its "on-chain dollar settlement pool" and becoming one of the global dollar settlement networks that is independent from local bank account systems. Future contests are likely to see both tracks coexist for the long term: one controlled by local regulation deeply coupled with the existing banking system's paths of tokenized deposits and central bank digital currencies, while the other is a cross-chain dollar token network represented by USDC, both complementary and competitive in payment, settlement, and collateral management. Currently, significant gaps remain regarding key information on GBTD—the overall transaction scale of the pilot, customer coverage, and the pace toward large-scale commercial application have not been disclosed, and whether regulators will open more scenarios, whether the technology architecture can extend to wholesale settlement levels, and what interlinkages will emerge with similar projects in other countries/regions will all be critical observation indicators determining the direction of this battle for settlement rights. In the coming years, whoever holds more programmable settlement "tracks" will have a greater claim to write the rules of the next version of the monetary system.
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