British lender Lloyds Banking Group claims bragging rights for completing the first bond purchase in the United Kingdom using tokenized deposits, or blockchain representations of bank deposits in fiat currency.
Lloyds, the country’s third-largest bank by market capitalization, said it enlisted the help of cryptocurrency trading platform Archax and 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, converting 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. Lloyds Bank Corporate Markets then used the deposits to pay for a token bond from Archax. Ultimately, Archax returned the underlying funds to its regular Lloyds account, the statement said.
“This transaction offers a vision of 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 incorporate real-world assets into blockchain infrastructure, creating opportunities for businesses to transact with greater speed, transparency and flexibility.”
Sengupta noted that tokenized deposits can continue to earn interest and remain in the Financial Services Compensation Plan deposit protection program, so these advantages (instant settlement, automated settlements, greater transparency and security) are achieved without losing the benefits of traditional cash.
