British lender Lloyds Banking Group is claiming bragging rights for having made the UK’s first purchase of gilts using tokenized deposits, or blockchain representations of bank deposits in fiat currency.
Lloyds, the country’s third-largest bank by market capitalization, said it tapped crypto trading platform Archax and the privacy-focused Canton Network to buy the government debt. The name of the bonds refers to the old gold-edged certificates.
The purchase illustrates how tokenization can transform traditional banking, transforming real-world assets into digital forms that can be bought, sold or transferred instantly, Lloyds said in a press release.
The transaction involved the company’s Lloyds Bank plc unit issuing tokenized deposits on the Canton network. Then Lloyds Bank Corporate Markets used the deposits to pay for a gilt symbolized by Archax. Finally, Archax placed the underlying funds back into its usual Lloyds account, the statement said.
“This transaction offers a glimpse into the future of finance: faster, smarter and more efficient,” Surath Sengupta, head of transaction banking products at Lloyds, said in a statement. “Tokenization allows us to integrate real-world assets onto blockchain infrastructure, creating opportunities for businesses to transact with greater speed, transparency and flexibility.”
Sengupta highlighted that tokenized deposits can continue to earn interest and remain in the Financial Services Compensation Scheme’s deposit protection scheme, so these benefits – instant settlement, automated agreements, improved transparency and security – come without losing the benefits of traditional money.
