Lloyds Bank

When a 260-year-old institution like Lloyds Bank executes a transaction on a blockchain, it’s worth paying attention. Late last year, Lloyds Banking Group quietly achieved something that could reshape the future of British finance: the first purchase of a tokenized government bond (gilt) using tokenized deposits—on a public blockchain network.

The move combined three separate innovations that, until recently, had lived in isolated pilot projects: tokenized deposits, digital government bonds, and public blockchain settlement infrastructure. The transaction wasn’t just a tech showcase—it was a glimpse of how the UK’s financial system could look within a few years.

How the Transaction Worked

Lloyds Bank issued tokenized deposits—digital representations of traditional bank money—directly on the Canton Network, a public blockchain designed for institutional finance.

Its corporate arm, Lloyds Bank Corporate Markets, then used those deposits to purchase a tokenized gilt from Archax, an FCA-regulated digital asset broker and exchange.

Once the trade was completed, Archax transferred the tokenized deposit back into its traditional Lloyds account. The entire process—issuance, trade, and settlement—took place across both blockchain and conventional banking systems, proving they can coexist in a single, integrated ecosystem.

In essence, Lloyds used blockchain-native money to buy blockchain-native bonds, then instantly bridged back to fiat.

Why This Isn’t “Just Another Pilot”

Banks run hundreds of blockchain experiments each year, but most happen in sealed-off “sandbox” environments. Lloyds’ move was different for three key reasons:

1. Public network participation: Canton Network isn’t a private bank-only chain. It’s a public, permissioned blockchain connecting multiple regulated institutions while maintaining privacy and compliance controls.

2. Real regulatory alignment: The transaction involved regulated entities using tokenized forms of real financial instruments—deposits and gilts—not synthetic test assets.

3. Infrastructure ownership: Lloyds isn’t merely testing technology; it operates a validator node on Canton. In other words, the bank is helping to run the network itself—an important signal that tokenization infrastructure is becoming part of the traditional banking stack.

All this transforms the initiative from a “proof of concept” into an operational milestone—a template for how banks and regulated markets may trade in a tokenized economy.

Why Tokenized Deposits Are the Real Game-Changer

Tokenized deposits are essentially digital versions of commercial bank money recorded on a distributed ledger. Unlike stablecoins, they:

• Accrue interest just like standard accounts.

• Are covered by existing deposit protection (such as the UK’s FSCS).

• Fit within the existing regulatory and accounting framework of the banking system.

And yet, by being issued on blockchain rails, they offer features traditional deposits can’t:

• Real-time settlement across institutions (no more T+2 delays).

• Programmable payments via smart contracts.

• Clear audit trails and instant reconciliation.

• Interoperability with tokenized securities and other assets.

This dual nature—regulated deposit plus blockchain functionality—could make tokenized deposits the preferred settlement instrument for banks long before a digital pound (CBDC) arrives.

Part of a Bigger UK Strategy

Lloyds’ experiment fits neatly within the UK’s broader plan to modernize financial market infrastructure.

• Six major UK banks—Barclays, HSBC, Lloyds, NatWest, Nationwide, and Santander—are participating in a tokenized deposits pilot led by UK Finance, running through mid-2026. The pilot uses interoperability tech from Quant Network to link different banking systems.

• The UK Debt Management Office (DMO) is working on the Digital Gilt Instrument (DIGIT)—a program to issue sovereign debt directly in tokenized form.

• The Bank of England has publicly stated that tokenized deposits are a greater priority than stablecoins for the banking sector, viewing them as a safer route to modernization.

Notably, this isn’t Lloyds’ first move in blockchain finance. In July 2025, it became the first UK bank to conduct an FX trade using tokenized collateral on the Hedera network—a signal that its tokenization agenda is deliberate, not exploratory.

Why It Matters

This single transaction connects all the components of a tokenized financial system:
tokenized money + tokenized assets + public infrastructure.

That’s the trifecta needed for what regulators call “atomic settlement”—instant, simultaneous exchange of assets and payments without counterparty risk.

If scaled, the implications are vast:

• Gilts and other securities could trade and settle in seconds rather than days.

• Collateral could be mobilized instantly across institutions.

• Cross-border liquidity management could become frictionless and 24/7.

And importantly, the UK is positioning itself as a global leader in regulated tokenization—well ahead of the EU’s fragmented DLT pilots and the US’s focus on ETFs as the primary entry point to blockchain-based assets.

The Bigger Picture

Financial infrastructure rarely evolves in headlines—it evolves in standards, frameworks, and plumbing. Lloyds’ validator node on a public blockchain is that kind of plumbing.

The bank didn’t just test blockchain; it became part of one.

This move represents the first building block of a financial internet—where deposits, bonds, and even central bank instruments exist as programmable, interoperable digital assets operating under the same legal protections as today’s financial system.

Or, put simply: the blockchain revolution doesn’t need to overthrow traditional finance—it’s quietly being absorbed into it.