Barclays, HSBC and Citi collaborate to pilot tokenized deposits in UK
Barclays, HSBC, and Citi, among other U.K. financial institutions, are embarking on a joint venture to pilot tokenized deposits.
A group of British banks, including Barclays and Citigroup, is working on a new pilot of tokenized deposits aimed at enhancing the tracking of banking payments. In a press release on Apr. 15, the British trade association UK Finance revealed that the lenders are embarking on the “UK Regulated Liability Network” experimentation phase, utilizing a “shared ledger” to streamline cross-border transactions.
In a commentary to Bloomberg, Quant CEO Gilbert Verdian indicated that participating firms are expected to utilize the trial platform for a period of two to three years before the technology is commercially implemented. Alongside banks and Quant, payment systems such as Mastercard, NatWest, Nationwide, and others are also actively involved in the pilot.
Scheduled to continue until the summer of 2024, the experimentation phase will concentrate on various aspects, including assessing customer and business benefits, evaluating technical feasibility, and addressing the legal framework pertaining to the operation of a shared ledger settlement system.
While it’s unclear whether the “shared ledger” is being developed on an existing blockchain network, other entities are exploring the integration of their tokenization services with existing products. For instance, in early April, Hong Kong’s investment banking firm GF Securities made headlines by launching a local tokenized commercial paper on the Ethereum blockchain, marking a major milestone in the local digital asset ecosystem.
The British government plans to introduce new regulations for stablecoins and other crypto services, such as staking, exchange, and custody, by mid-year.
Economic Secretary Bim Afolami announced this at the Innovate Finance Global Summit this week. He emphasized the rapid progress being made to establish a comprehensive regulatory framework and said the government is quickly advancing the legislation that will finalize the new regulatory proposals.
Once implemented, this legislation will bring various cryptocurrency operations, including exchanges and custodial services, under regulatory oversight for the first time.
Last year, the U.K. enacted a significant financial markets bill that set the groundwork for treating stablecoins and broader cryptocurrency activities as regulated financial services within the nation.
Early last year, the Financial Conduct Authority (FCA) and the Bank of England (BoE) contributed their expertise to shape the regulatory approach to stablecoins.
The BoE will oversee stablecoin entities that pose systemic risks, while the FCA will regulate the broader cryptocurrency market. In addition to these developments, Afolami revealed in February that supplementary legislation specifically targeting stablecoins was underway and expected to be finalized within the next six months.
The U.K. has slowly improved its crypto adoption with new regulatory and legislative moves.
Last week, the London Stock Exchange (LSE) began accepting listing applications for Bitcoin and Ethereum exchange-traded notes (ETNs).
Like Bitcoin ETFs in the U.S., the ETNs will allow institutional investors to gain exposure to the crypto market, with trading set to begin May 28.