In a pioneering move for the UK financial landscape, Lloyds Banking Group and Aberdeen Investments have utilized tokenised real-world assets as collateral for foreign exchange transactions.
The initiative involves tokenised units from Aberdeen Investment’s money market fund and tokenised UK government bonds, which were issued, transferred, and securely managed by FCA-regulated digital asset exchange Archax on the Hedera Hashgraph public permissioned blockchain.
Archax emphasizes that digital assets can be programmed to adhere automatically to trading agreement rules, which streamlines the margining process. This innovation aims to reduce operational costs, enhance collateral efficiency, and minimize counterparty risk.
The broader implementation of tokenised funds as collateral may also help mitigate systemic risk during times of market stress by facilitating digital transfers instead of forced asset sales, thus lessening market volatility.
Peter Left, Head of Digital Finance at Lloyds, stated, “This landmark initiative demonstrates that digital assets can operate within regulated financial markets under existing legal frameworks in the UK. It marks a significant advancement in showcasing how tokenisation can improve collateral efficiency, reduce friction, and create new trading opportunities.”