Three UK financial leaders – Lloyds Banking Group, Aberdeen Investments, and regulated digital exchange Archax – have successfully executed the nation’s first institutional transaction using tokenized assets as collateral for foreign exchange trades.
The pilot utilized Tokenized shares from Aberdeen’s money market fund (tMMF) and Digital UK government bonds as collateral for FX transactions, with Archax providing FCA-regulated issuance and custody on Hedera Hashgraph’s enterprise blockchain.
The UK engages in $5.4 trillion worth of foreign exchange and interest rate derivatives each day, representing 50% of worldwide activity. This trading activity highlights that regulated digital assets can be utilized as collateral in this sector, marking an important achievement.
Programmable digital assets enable:
- Automated compliance with trading terms
- Streamlined margin processing
- Enhanced collateral mobility
- Reduced counterparty exposure
Emily Smart, Chief Product Officer at Aberdeen Investments, stated, “Tokenization has been recognized as a crucial facilitator in the realm of digital innovation. We are thrilled to partner with Lloyds and Archax to showcase the practical application of on-chain collateral movements utilizing tokenized assets. This illustrates how digital assets can enhance processes and boost efficiency.”
Peter Left, Head of Digital Finance at Lloyds Banking Group, remarked, “This pioneering initiative demonstrates that digital assets can operate within regulated financial markets under the current legal frameworks in the UK. It represents a significant advancement in showing how tokenisation can improve collateral efficiency, minimize friction, and create new trading possibilities.”
Graham Rodford, CEO and co-founder of Archax, added, “This recent use case for Nest, our permissioned DeFi collateral transfer network, underscores the effectiveness of regulated digital infrastructure in meeting institutional-grade requirements. We are eager to collaborate with Lloyds and Aberdeen on this project and anticipate expanding the use of tokenised real-world assets as transferable collateral. This marks another important digital milestone in building a more open and efficient financial system.”
This institutional proof-of-concept between traditional finance leaders and a regulated crypto-native firm validates the UK financial sector’s ability to bridge conventional and digital markets while maintaining rigorous compliance standards, reinforcing the country’s position at the forefront of hybrid financial innovation.
Source: archax
