Lloyds Bank, Archax and Canton Network Complete UK’s First Gilt Purchase Using Tokenised Deposits

Core Insights - Lloyds Banking Group has executed the first-ever Gilt purchase using tokenised deposits on a public blockchain in the UK, marking a significant milestone in digital finance [1] Group 1: Transaction Overview - The transaction involved Lloyds Bank PLC issuing tokenised deposits on the Canton Network, which is designed for regulated financial markets [2] - Lloyds Bank Corporate Markets utilized these tokenised deposits to purchase a tokenised UK Gilt issued by Archax [2] - Following the trade, Archax transferred the underlying funds back to its standard Lloyds bank account, demonstrating interoperability between blockchain and traditional banking systems [3] Group 2: Technology and Design - The Canton Network's public-but-private design was crucial, allowing broader industry participation while ensuring confidentiality and compliance, essential for institutional adoption [4] - Tokenisation enables instant settlement and atomic transactions, reducing counterparty risk, improving liquidity, and shortening settlement cycles, addressing inefficiencies in traditional capital markets [6] Group 3: Benefits of Tokenised Deposits - Tokenised deposits allow businesses to transact on blockchain networks while maintaining characteristics of traditional bank deposits, such as interest accrual and regulatory protections [7] - Firms can access and trade a wider range of assets across both traditional and on-chain markets using a single cash instrument [7] - Additional benefits include real-time settlement, smart contract automation to mitigate operational risk, and enhanced transparency through distributed ledger records [8] Group 4: Future Implications - The Gilt purchase aligns with the UK government's exploration of issuing digital versions of traditional securities, showcasing how tokenisation can support this initiative [5] - Lloyds' transaction builds on previous digital asset collaborations with Archax, indicating a pathway to more efficient financial markets without compromising traditional banking safeguards [9]