Embracing blockchain: How tokenisation changes the game for digitised finance

Peter Left, Head of Digital & Markets Innovation

Embracing blockchain: How tokenisation changes the game for digitised finance

^{Financing UK infrastructure}^|^{Embracing blockchain}^|^{Longevity risk}^|^{Accelerating digital trade}^|^{Implementing AI}

As we stride towards a fully digitised financial system, the value of digital assets and Distributed Ledger Technology (DLT) is becoming increasingly clear. Peter Left, Head of Digital & Markets Innovation, Lloyds Banking Group, shares his views on recent developments in tokenisation and how clients can both navigate and participate in this fast-evolving space.

Peter Left,
Head of Digital & Markets Innovation,
Lloyds Banking Group

New kid on the blockchain

Blockchain technology has demonstrated significant potential to improve financial services for the better, offering faster, more resilient and more efficient operations. While adoption has been slow for a range of reasons, the narrative is now shifting thanks to changes to regulatory and legal frameworks¹ such as MiCA and the GENIUS Act, technical advancements around privacy and growing recognition of the commercial and institutional opportunities.

This alignment of incentives is laying the ground for rapid progress in the digital finance space, beginning with the application of new technologies to traditional forms of money and assets within their regulated environments. In the longer term, these initial steps lay the foundation for a more transformative future – one that includes natively digital assets such as stablecoins, cryptocurrencies, and programmable securities.

At their core, digital assets are representations of value that exist in digital form, from money and property through to contracts, investments or financial instruments. The ownership rights to these assets are converted – through a process of tokenisation – into fractional digital tokens held on an electronic ledger, called a blockchain, which is distributed among its users. Blockchain is a digital record-keeping technology that securely stores and replicates data across many computers, otherwise known as nodes, at the same time. This means that no single computer or institution can control or change the record independently, making it both secure and resilient since it is almost impossible to tamper with, yet easy to verify.

The tokenisation of both money and real-world assets (for example, deposits, bonds, or money market funds) has rapidly moved from proof of concept to pilot initiatives in recent years, across a range of mainly institutional use cases such as payments, liquidity management and settlement.

^{Financing UK infrastructure}^|^{Embracing blockchain}^|^{Longevity risk}^|^{Accelerating digital trade}^|^{Implementing AI}

Paradigm shift

For businesses, in time, this transformation has the potential to change the game entirely. CFOs and treasurers will have the opportunity to tokenise every item on their balance sheet – from deposits through to loans, invoices, warehouse inventory or even assets such as machinery. These assets – and liabilities – can then be stored, transferred, mobilised as security or settled instantly all viewed through the company’s multi-purpose wallet.

A key enabler of this shift is the emergence of regulated digital money on blockchain. Commercial banks are now deploying tokenised deposits – regulated, interest-bearing digital representations of money that offer capital buffers and compliance safeguards. Unlike stablecoins, which are unregulated and lack loss-absorbing buffers, tokenised deposits provide a safer and more robust foundation for on-chain financial operations. This means businesses can settle transactions, automate payments, and manage liquidity with confidence, knowing the underlying money is secure and compliant.

_{^{1. MiCA}}_{^{European crypto-assets regulation (MiCA) | EUR-Lex}}_{^{, GENIUS Act}}_{^{Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law – The White House}}_{^{and UK Regulatory regime for cryptoassets}}_{^{Regulatory regime for cryptoassets (regulated activities) – Draft SI and Policy Note - GOV.UK}}

Tokenisation therefore offers the opportunity to mass aggregate and manage assets and liabilities across the business, transforming the future of payments, supply chains, and risk management – to name just a few areas. Blockchain means that traditional multi-step processes can be inherently simplified. For example, lengthy trade processes can be reduced to one step – removing reconciliation and settlement risk since the trade, its confirmation and its settlement are all part of the same instrument in the transparent digital ledger.

For treasurers, this opens the door to the smarter management of working capital and new forms of collateral. Meanwhile, real-time visibility provides faster and more accurate reporting, streamlined reconciliation and reduced operational risks. Fundamentally, the technology should lead to a more efficient and safer financial ecosystem.

Leading the charge

Lloyds is fully embracing this technology to help make our clients’ operations faster, smoother and more resilient. We believe it has the potential to be genuinely transformative very soon – although it will be a step-by-step journey given the wide range of use cases and inherent complexities involved. By collaborating with pioneering UK institutions and leveraging regulated digital infrastructure, we’re helping to lay the foundations for scalable, next-generation digital finance, setting the standards for tokenised deposits and reinforcing the UK’s position as a global leader in this space.

^{Financing UK infrastructure}^|^{Embracing blockchain}^|^{Longevity risk}^|^{Accelerating digital trade}^|^{Implementing AI}

CFOs and treasurers will have the opportunity to tokenise every item on their balance sheet – from deposits through to loans, invoices, warehouse inventory or even assets such as machinery.

Peter Left,
Head of Digital & Markets Innovation,
Lloyds Corporate & Institutional

Recently, Lloyds worked alongside Aberdeen Investments and Archax to complete a UK-first in digital finance, successfully using tokenised versions of real-world assets (Money Market Funds and Gilts) as collateral for foreign exchange trades. This transaction demonstrated how regulated digital tokens can be used effectively in high-volume trading environments and help enable new collateral efficiencies, lower trading desk funding costs, improve capital efficiency and reduce settlement times.

Lloyds will build on this pilot of using tokenised Gilts as collateral to also settle tokenised Gilts and tokenised Money Market Fund purchases with tokenised deposits. Tokenised deposits provide regulated money on blockchain to allow automated immediate or scheduled exchange, versus delivery of another leg (foreign currency, security or real-world events such as goods delivery). As it stands, there is limited infrastructure that connects tokenised deposits with digital assets, and our pilots will represent a pivotal step towards establishing this and provide a long-term foundation to build from. In time, our objective is to enable Lloyds’ customers to use their tokenised deposits to trade a range of assets and automate several customer journeys using blockchain.

Lloyds is developing a digital wallet framework to ensure that as a financial services provider, we can support our clients by providing this new technology and acting as the custodian of the cryptographic keys that control access to tokenised assets on their behalf. We expect to be able to offer this service to clients in 2026.

^{Financing UK infrastructure}^|^{Embracing blockchain}^|^{Longevity risk}^|^{Accelerating digital trade}^|^{Implementing AI}

A shared opportunity

What’s most exciting is that this isn’t a zero-sum game. The entire financial ecosystem – from banks and asset managers to our clients and regulators – has the potential to benefit from a fundamental shift towards digitised finance. Digital Finance makes it easier to create a claim over security or transfer collateral intraday and will reduce exposure and risk allowing increased sources of capital and liquidity at improved prices.

We’re already in active conversations with clients and piloting multiple initiatives. The technology is here, the use cases are clear, and the benefits compelling. Now it’s about scaling, standardising and working with regulators to unlock its full potential.

^{Financing UK infrastructure}^|^{Embracing blockchain}^|^{Longevity risk}^|^{Accelerating digital trade}^|^{Implementing AI}

Can you see use cases for tokenisation or digital assets in your company?

Yes – we're already exploring or piloting tokenised assets
Possibly – we're interested but still assessing the potential
Not yet – we need more clarity on regulation and infrastructure
No – it's not relevant to our business model

^{Financing UK infrastructure}^|^{Embracing blockchain}^|^{Longevity risk}^|^{Accelerating digital trade}^|^{Implementing AI}

Key takeaways

The widespread adoption of blockchain technology, tokenisation, and digital assets is offering businesses new possibilities in terms of speed, resilience and efficiency.
Distributed Ledger Technology (DLT) and digital tokens enable real-time financial management, streamlined reconciliation, and new forms of collateral.
Lloyds is at the vanguard of innovation in this space, and we are actively piloting ways our customers can use tokenised deposits to transform their financial operations.
Our digital wallet framework, under development, will allow us to support clients as the custodian of cryptographic keys for tokenised assets.