Lloyds and Aberdeen completes UK's first FX trade using tokenized UK gilts and money market funds

Lloyds Banking Group and Aberdeen Investments have executed the United Kingdom’s first foreign exchange (FX) trade collateralized using tokenized assets, including UK gilts and money market fund units.

The transaction was facilitated through a partnership with Archax, a Financial Conduct Authority (FCA)-regulated digital asset exchange, and carried out on the Hedera Hashgraph blockchain. The initiative marks the first time that tokenized real-world assets (RWAs) have been used as collateral in a regulated FX trade within the UK.

“This groundbreaking initiative proves digital assets can be used in regulated financial markets under existing legal frameworks here in the UK,” said Peter Left, head of digital finance at Lloyds. “It’s a major step forward in demonstrating how tokenisation can enhance collateral efficiency, reduce friction, and unlock new trading opportunities.”

The UK crosses a milestone in tokenized collateral

This project is part of a broader move by the UK government and private institutions to explore tokenization in financial services. In March, the Chancellor of the Exchequer invited market participants to help shape the UK’s framework for digital gilt instruments — a consultation that has laid the groundwork for regulated innovation such as this pilot.

The significance of this first use case is underlined by the scale of the market it touches. The UK accounts for nearly half of all global activity in FX and interest rate derivatives, trading an estimated $5.4 trillion daily.

Applying blockchain to even a fraction of this activity could reduce systemic risk and introduce greater transparency, speed, and efficiency.

The fact that Archax is fully FCA-regulated ensures compliance, while Lloyds and Aberdeen bring institutional scale and credibility to the experiment.

Notably, the initiative was executed within the UK’s current legal framework, a point both Lloyds and Archax emphasized. The ability to carry out these operations without requiring legislative changes makes it more likely that tokenized finance will scale quickly across asset classes and market functions.

Participants make a case for efficiency and resilience

The application of digital tokens in this transaction reduces the operational friction involved in traditional collateral processing and enables near-instantaneous settlement. It also helps mitigate counterparty risk by reducing the exposure window between trade execution and collateral delivery.

Graham Rodford, CEO and co-founder of Archax, spoke on the significance of the collaboration in a statement:

“This latest use-case for Nest, our permissioned DeFi collateral transfer network, highlights the power of regulated digital infrastructure to support institutional-grade needs.”

He added that the initiative “established another key digital milestone in the foundation for a more open and efficient financial system.”

Emily Smart, Chief Product Officer at Aberdeen Investments, shared a similar view:

“Tokenization has long been seen as a key enabler in the new world of digital innovation… this demonstrates the ability of digital assets to streamline processes and increase efficiency.”

Beyond immediate gains in operational efficiency, wider adoption of tokenized funds and gilts could offer macro-level benefits, especially in times of market stress. By digitizing collateral, institutions may avoid fire sales of assets to meet margin requirements, thereby reducing volatility and systemic risk.

KEY Difference Wire helps crypto brands break through and dominate headlines fast