On January 7, Lloyds Bank, Archax and the Canton Network executed the United Kingdom’s first gilt purchase settled with tokenised bank deposits, marking a live demonstration of distributed ledger technology inside regulated finance. The trade converted on‑balance‑sheet sterling deposit tokens into a tokenised UK government bond, showing immediate interoperability between blockchain settlement and conventional banking accounts.
The transaction tested delivery‑versus‑payment on a public-but-private DLT and highlighted operational features — instant settlement, programmable cash and on‑chain finality — that could shorten multi‑day settlement cycles in wholesale markets.
Lloyds Bank issued tokenised sterling deposits on the Canton Network, operated a validator node and used those deposit tokens via Lloyds Bank Corporate Markets to buy the tokenised gilt.
While Archax issued the tokenised UK gilt and acted as counterparty; after the on‑chain exchange Archax returned the underlying fiat funds into its standard Lloyds bank account, demonstrating cash‑rail interoperability. Meanwhile, Canton Network provided the privacy‑focused public ledger used for the transaction; its architecture enabled regulated participants to transact on a shared ledger while preserving confidentiality and compliance.
Tokenised deposits in this trade were bank liabilities held on‑chain and therefore remained on Lloyds’ balance sheet rather than operating as third‑party stablecoins. That design preserves regulatory protections such as eligibility for Financial Services Compensation Scheme coverage up to £85,000, while enabling smart‑contracted settlement and atomic exchanges of assets.
Why this matters for markets and regulators
The settlement illustrated several practical advantages: near‑instant delivery‑versus‑payment, lower counterparty exposure and reduced need for multi‑day reconciliation. After the trade, Archax moved the fiat proceeds back into a traditional Lloyds account, which underlined that on‑chain activity need not disrupt existing cash management and custody frameworks.
“Tokenisation allows us to bring real‑world assets onto blockchain infrastructure, creating opportunities for businesses to transact with greater speed, transparency and flexibility,” said Surath Sengupta, head of transaction banking products at Lloyds. The bank framed the move as part of a broader strategy to modernise payment and settlement plumbing.
Regulators and central banks have differentiated tokenised deposits from typical stablecoins because deposit tokens sit within regulated banking frameworks and carry the legal and balance‑sheet protections of bank money. Market participants expect that distinction to shape how tokenised money scales inside a so‑called multi‑money system.
Investors and market infrastructure providers will now watch whether banks extend tokenised deposit capabilities to a broader set of securities and whether regulators formalise technical and custody standards that preserve consumer protections while allowing faster, programmable settlement. The pilot provides a working blueprint; the real test will be adoption at scale and the integration of similar flows into routine market operations.
