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Lloyds Banking Group has completed a pilot that swaps paper pledges for on-chain tokens when banks trade foreign exchange. CCN reports the deal saw Lloyds and asset-manager abrdn use digital units of UK gilts and a money-market fund as collateral, with regulated exchange Archax handling issuance on Hedera.
A parallel Lloyds release outlines how the tokens moved from abrdn’s account to Lloyds’ margin pool and back in under thirty seconds—work that normally takes half a day. The bank says faster collateral unlocks capital and slashes operational risk because assets stay in digital form instead of bouncing between custodians.
“The test proves digital assets can work inside UK rules and cut friction across markets,” said Peter Left, head of digital finance at Lloyds, during the pilot debrief quoted by MarketsMedia quotes. He added that instant settlement lets traders recycle collateral several times a day, boosting liquidity without raising leverage.
Ledger Insights notes that the Financial Conduct Authority already licenses Archax as a digital-asset custodian, so no extra exemptions were needed. The same stack could next secure mortgage portfolios or commercial-property loans, areas where title transfer and valuation often slow funding lines.
Tokenised collateral is gaining pace across Europe as rising rates pressure banks to use cash more efficiently. BNP Paribas, Santander and Italy’s Cassa Depositi have run similar tests, but Lloyds is the first UK lender to plug real-world-asset tokens directly into live FX workflows. If regulators are satisfied, the bank plans a larger rollout in 2026 that would let corporate clients post buildings or invoices as programmable collateral—turning static assets into liquid trading chips.
