The largest banks in Britain have done their initial transfers of tokenised deposits among the banks, moving blockchain-based bank money past experimentation and nearer to a viable settlement method for tokenised assets. This means tokenised deposits compete with or operate alongside stablecoins, Reuters reports.Two mortgage trades and a marketplace paymentThe transactions were done under UK Finance as part of its Great British Tokenised Deposit project. Lloyds Banking Group, NatWest, and Barclays performed two remortgage transactions, while three banks, including HSBC, executed a customer-to-customer payment that mimics an online marketplace purchase.In that experiment, programmable deposits held the money belonging to the buyer and released it only after the goods were delivered. Although no tangible goods were exchanged, the experiment illustrated how tokenised bank money could help to decrease fraud, while letting transactions between banks happen instead of staying within unrelated banking systems.The pilot covers marketplace payments, remortgaging, and digital asset settlement. The organizations involved in the pilot are Barclays, HSBC, Lloyds, Monzo, NatWest, Nationwide, and Santander, with Quant, EY, and Linklaters providing support to the project.According to Jana Mackintosh, the managing director of payments and innovation of UK Finance, the project is already drawing international interest.In the last 12 months, other jurisdictions have been speaking to us in earnest about what we’ve done.— Jana Mackintosh, UK Finance managing director for payments and innovation, ReutersWhy bank liabilities, not stablecoinsTokenised deposits and stablecoins are not different only in technical aspects; they are different in terms of the meaning of the relevant money.According to the IMF, tokenised deposits can be defined as bank liabilities, which are being transferred on a blockchain or another distributed-ledger technology. Thus, changing technology influences how the deposit is transferred but not what the deposit is.Stablecoins are different. They are separate liabilities, issued by private companies and based on reserve assets. According to Reuters, the Bank of England prefers to see banks issuing tokenised deposits rather than using privately-issued stablecoins.The BIS also made this argument, claiming that tokenised deposits are more aligned with the current two-tier monetary system.The Governor of the Bank of England, Andrew Bailey, has presented tokenisation as a means of modernising current forms of money and not as a complete replacement.We are now working with the banks to design and implement the introduction of so-called tokenised money.— Andrew Bailey, Governor of the Bank of England, Bank of England speechThat does not mean that stablecoins have become irrelevant. Deputy Governor Sarah Breeden has articulated the idea of a “multi-money” system in which conventional deposits, tokenised deposits, and regulated systemic stablecoins could coexist and be easily converted at par value.Canada and the US are building the same railsThe same shift is taking shape outside the UK. In June, major US banks backed an on-chain money network run by The Clearing House, designed to connect tokenised commercial-bank money with payment rails already used by the financial system, including RTP and CHIPS.Bank of America’s Mark Monaco put it this way:This initiative brings together the innovation of digital finance with the trust, scale, and settlement certainty of established bank payment infrastructure.Canada seems to be heading in the same direction. Its Big Six banks are working together to develop a Canadian-dollar tokenised-deposit rail. Clarity was provided about the regulatory aspect surrounding this initiative on September 10 when OSFI announced:The underlying technology of a financial product or service does not determine its legal nature.Cryptopolitan has also reported that SWIFT has 17 banks across six continents lined up for tokenised cross-border-payment trials.The prize: a settlement question worth trillionsThe market these banks want to settle could become enormous. Citi Institute projects tokenised financial assets at $5.5 trillion by 2030 in its base case and $8.2 trillion in its bull case, compared with a $1.9 trillion stablecoin base case. Binance Research puts real-world-asset AUM on-chain at $34.18 billion as of September 15, up 85.2% year to date, while only about 12% of tracked tokenised capital is actively deployed in liquidity, lending or collateral markets.Tokenized deposits vs stablecoins: key figures in the $8.2T market raceBanks already have scale. McKinsey estimates major global banks move more than $4 trillion annually through tokenised-deposit infrastructure. UK participants are also preparing three digital bonds for the first quarter of 2027 that could trade and settle using tokenised deposits.For crypto, the question is no longer whether banks will use blockchain. It is whether bank money takes settlement volume that might otherwise go to stablecoins, or instead becomes the trusted cash leg that helps tokenised securities and real-world assets scale. UK Finance will hold a project webinar on October 6.The smartest crypto minds already read our newsletter. Want in? Join them.