UK’s Lloyds Banking Group claims bragging rights as it completes the purchase of the first UK gilt bond on behalf of a blockchain using tokenized deposits or fiat currency bank deposits.
Lloyds, the third largest U.S. bank by market capitalization, said it bought government debt with the help of cryptocurrency trading platform Archax and privacy-focused Canton Network. The name of the bond refers to the old gold-edged certificate.
Lloyds Bank said in a press release that the purchase illustrates how tokenization is transforming traditional banking, turning real-world assets into digital forms that can be instantly bought, sold or transferred.
The deal involves the company’s Lloyds Banking unit issuing tokenized deposits on the Canton Network. Lloyds Bank Corporate Markets then uses these deposits to pay down Archax’s tokenized gilts. Ultimately, Archax transferred the underlying funds back to its regular Lloyds account, the release said.
“This deal gives us a glimpse into the future of finance; faster, smarter and more efficient,” Surath Sengupta, head of transaction banking products at Lloyds Bank, said in a statement. “Tokenization allows us to bring real-world assets to blockchain infrastructure, creating opportunities for businesses to trade with greater speed, transparency and flexibility.”
Sengupta noted that tokenized deposits can continue to earn interest and remain within the Financial Services Compensation Scheme Deposit Protection Scheme, so these advantages – instant settlement, automated protocols, increased transparency and security – are achieved without losing the benefits of traditional cash.