British lender Lloyds Banking Group is claiming bragging rights for completing the first purchase of UK government bonds using tokenized deposits, or blockchain representations of bank deposits in fiat currency.
Lloyds, the country’s third-largest bank by market capitalization, said it has enlisted the help of crypto trading platform Archax and privacy-focused Canton Network to buy the government debt. The name of the bonds refers to the old certificates with golden edges.
The purchase illustrates how tokenization can transform traditional banking, by transforming real-world assets into digital forms that can be instantly bought, sold or transferred, Lloyds said in a press release.
The transaction involved the company’s Lloyds Bank plc unit issuing tokenized deposits on the Canton Network. Lloyds Bank Corporate Markets then used the deposits to pay for a tokenized gilt from Archax. Ultimately, Archax moved the underlying funds back to its regular Lloyds account, the release said.
“This transaction offers a glimpse into the future of the financial sector; faster, smarter and more efficient,” Surath Sengupta, head of transaction banking products at Lloyds, said in a statement. “Tokenization allows us to bring real-world assets onto the blockchain infrastructure, providing businesses with opportunities to transact with greater speed, transparency and flexibility.”
Sengupta pointed out that tokenized deposits can continue to earn interest and remain within the Financial Services Compensation Scheme’s deposit protection program, so these benefits – instant settlement, automated agreements, improved transparency and security – come without losing the benefits of traditional cash.