Understanding the Impact of Tokenised Banking on Startup Founders in the UK
Updated: 3 days ago
The UK’s biggest banks are quietly transforming the financial system that startup founders rely on. Lloyds, Barclays, HSBC, NatWest, Nationwide, Santander, and Monzo are all involved in building tokenised banking infrastructure. This is not a crypto experiment or a speculative venture. It is the existing financial system being upgraded from within, using digital tokens to represent traditional assets like sterling deposits.
Many founders associate tokenisation with fundraising: issuing tokens that represent shares in their companies. While that is one important aspect, there is a broader and faster-moving story: the banking system itself is becoming tokenised. Understanding this shift is crucial for startup founders who want to stay ahead and make informed decisions about their banking and finance.
What Tokenised Banking Means for Founders
Tokenised banking involves creating digital tokens that represent traditional financial assets held by banks. These tokens are not cryptocurrencies or stablecoins. They are digital versions of the same money founders already use, but with added benefits such as faster settlement, greater transparency, and improved programmability.
For example, a tokenised deposit is a digital token that represents a sterling deposit held at a bank. It can be transferred instantly and securely on a blockchain-like network, reducing the delays and costs associated with traditional banking transactions.
In January 2026, Lloyds completed the UK’s first public blockchain transaction using tokenised sterling deposits. They purchased a tokenised gilt (a UK government bond) from the digital asset exchange Archax via the Canton Network. This transaction demonstrated how tokenised deposits can be used in real-world financial markets, not just as a theoretical concept.
Why UK Banks Are Building Tokenised Infrastructure
The involvement of major banks shows that tokenisation is not a fringe idea. UK Finance, the trade body representing over 300 financial institutions, launched a live pilot project involving six banks to test tokenised deposits across three real-world use cases. Monzo later joined as the seventh participant.
These banks are motivated by the potential to:
Speed up transactions: Tokenised deposits can settle instantly, unlike traditional payments that may take days.
Reduce costs: Fewer intermediaries and simpler processes lower transaction fees.
Increase transparency: Tokenised assets can provide clear, auditable records.
Enable new financial products: Programmable tokens allow for automated compliance and innovative services.
For startup founders, this means the banking services they depend on will become faster, cheaper, and more flexible.
How Tokenised Deposits Differ from Crypto
It is important to clarify what tokenised deposits are not:
Cryptocurrencies like Bitcoin or Ethereum.
Stablecoins issued by private companies.
Speculative assets subject to wild price swings.
Instead, tokenised deposits are digital representations of money held at regulated banks. They carry the same legal protections and stability as traditional bank deposits. The difference lies in how they are recorded and transferred, using secure, blockchain-inspired technology rather than legacy payment rails.
This distinction matters because many founders hesitate to engage with anything labelled “token” due to the volatility and regulatory uncertainty surrounding crypto. Tokenised banking infrastructure offers the benefits of digital assets without those risks.
Practical Benefits for Startup Founders
Startup founders can expect several practical improvements as tokenised banking becomes mainstream:
Faster payments and settlements: Payroll, supplier payments, and investor distributions can happen in near real-time.
Simplified fundraising: Tokenised shares and deposits can be managed on the same platform, reducing administrative overhead.
Improved cash management: Programmable tokens enable automated workflows, such as releasing funds only when certain conditions are met.
Greater transparency and auditability: Every transaction is recorded immutably, simplifying compliance and reporting.
For example, a founder raising capital through tokenised shares can receive funds instantly as tokenised deposits, which can then be used immediately for business expenses or investments.
What Founders Should Do Now
The tokenisation of banking is still in its early stages but moving quickly. Founders should:
Stay informed about developments from their banks and UK Finance.
Ask their banking partners about tokenised deposit services and pilot programs.
Consider how tokenised banking could improve their operations, such as faster payments or automated compliance.
Seek professional advice before making decisions involving tokenised assets or fundraising.
Understanding this shift will help founders avoid surprises and take advantage of new opportunities as tokenised banking becomes part of everyday business.
How we got here
The industry pilot, now known as the Great British Tokenised Deposit initiative, was launched by UK Finance in September 2025 and was set to run until mid-2026. It builds on earlier phases of the UK Regulated Liability Network project. The six founding banks were Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide and Santander, supported by Quant, EY and Linklaters, and Monzo joined in January 2026. The three use cases chosen were marketplace payments between individuals, remortgaging, and settlement of digital assets.
The Lloyds transaction on 8 January 2026 added detail to the picture. Lloyds ran its own validator node on the Canton Network, and after the deal Archax moved the funds back into its ordinary Lloyds account. The two firms had previously used tokenised units of an Aberdeen money market fund and tokenised gilts as collateral for foreign exchange trades.
Key facts at a glance
UK Finance published results from the pilot on 24 September 2026.
Lloyds, NatWest and Barclays completed two remortgages paid with tokenised sterling deposits, with funds locked and released automatically at completion.
A separate group of banks, including HSBC, tested a marketplace payment in which funds were released only when goods were exchanged. No real goods were involved.
UK Finance says tokenised deposits keep the protections of conventional bank deposits.
What happens next
The banks plan to set up a company, rulebook and governance framework to move from pilot to production. Three digital bonds are due to be issued in the first quarter of 2027, with trading, settlement and coupon payments in tokenised deposits, and further pilots will exchange tokenised customer money for digital assets. Alongside this, the Bank of England published draft rules for systemic stablecoins in June 2026, with regulated stablecoins expected from 2027.
For founders, the working use cases matter more than the technology. Both the remortgage and marketplace tests hold money until a condition is met, which is the job escrow services do today. Startups running marketplaces or payment flows that depend on conditional release may want to watch whether their own bank offers this to business customers once the scheme moves into production.
Sources
Frequently asked questions
Which UK banks are building tokenised banking infrastructure?
Lloyds, Barclays, HSBC, NatWest, Nationwide, Santander and Monzo are all involved. UK Finance launched a live pilot with six banks to test tokenised deposits across three real-world use cases, and Monzo later joined as the seventh participant.
What is a tokenised deposit?
A tokenised deposit is a digital token that represents a sterling deposit held at a regulated bank. It can be transferred instantly on a blockchain-like network and carries the same legal protections and stability as a traditional bank deposit.
How are tokenised deposits different from cryptocurrencies and stablecoins?
Tokenised deposits are not cryptocurrencies such as Bitcoin or Ethereum, not stablecoins issued by private companies, and not speculative assets subject to wild price swings. They are digital representations of money held at regulated banks, recorded and transferred using blockchain-inspired technology.
What was the UK's first public blockchain transaction using tokenised sterling deposits?
In January 2026, Lloyds used tokenised sterling deposits to buy a tokenised gilt, a UK government bond, from the digital asset exchange Archax via the Canton Network.
How could tokenised banking benefit UK startup founders?
Payroll, supplier payments and investor distributions could settle in near real time. Programmable tokens could automate cash workflows, such as releasing funds only when conditions are met, and immutable transaction records could simplify compliance and reporting.
Disclaimer:
This article is provided for general information only and does not constitute legal, financial, or investment advice. The regulatory treatment of tokenised assets and digital securities varies by jurisdiction and continues to evolve. Readers should seek independent professional advice before making any financial, legal, or regulatory decisions.
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