Lloyds Banking Group, Aberdeen Investments, and Archax announce a partnership to advance the use of blockchain technology, utilizing tokenized real-world assets (RWAs) as collateral for their trading businesses.
In a UK-first initiative, tokenised “units of Aberdeen Investment’s money market fund (tMMF) and tokenised UK gilts were used as collateral for foreign exchange (FX) trades between Aberdeen and Lloyds.”
These digital tokens were “issued, transferred, and securely held by Archax – a UK FCA-regulated digital asset exchange – on the Hedera Hashgraph public permissioned blockchain.”
The UK trades $5.4 trillion “in FX and interest rate derivatives daily, which accounts for half of global activity.
This trade demonstrates “that regulated digital assets can serve as collateral in this market, which is a significant milestone.”
Digital assets can be programmed to automatically “follow the rules of trading agreements streamlining the margining process, reducing operational costs, enhancing collateral efficiency, and minimising counterparty risk.”
Wider adoption of tokenised funds as collateral “could also help reduce systemic risk during periods of market stress by enabling digital transfers instead of forced asset sales—thereby reducing volatility.”
This collaboration between two of “the UK’s largest financial institutions and a homegrown regulated fintech marks a major step forward in digital finance.”
The successful pilot lays the foundation “for scaling tokenised collateral solutions, reinforcing the UK’s leadership in next-generation financial infrastructure.”
Emily Smart, Chief Product Officer, Aberdeen Investments says:
“Tokenisation has long been seen as a key enabler in the new world of digital innovation. That’s why we are delighted to collaborate with Lloyds and Archax, to demonstrate real-world application of on chain collateral movements using tokenised assets. This demonstrates the ability of digital assets to streamline processes and increase efficiency.”
Peter Left, Head of Digital Finance at Lloyds Banking Group, said the inititative proves that digital assets can be used in regulated financial markets under existing frameworks in the UK.
Graham Rodford, CEO and co-founder of Archax, said they look forward to scaling the use of tokenized RWAs as collateral.