Lloyds Banking Group and Aberdeen Investments have completed the first foreign exchange trade using tokenised collateral in the UK.
Tokenised units of Aberdeen Investment’s money market fund and tokenised UK gilts were used in the trade. Financial Conduct Authority (FCA) regulated digital asset exchange Archax issued, transferred and held the assets on a public permissioned blockchain, Hedera Hashgraph.
Public permissioned blockchains are visible to all, but only verified users can participate in them.
Simon Barnby, chief marketing officer at Archax, told The DESK, “Some institutions are nervous about public blockchains because of the amount of information that people can potentially see. Some projects use private blockchains, but with that approach you lose some of the easily transferable nature. Permissioned public blockchains can give you the best of both worlds.”
Hedera Hashgraph is a completed open source distributed ledger that uses proof of stake as a consensus mechanism. Archax confirmed that it can also operate on alternative blockchains.
The firms state that using tokenised funds as collateral replaces forced asset sales with digital transfers, reducing volatility and potentially minimising systematic risk during market stress.
Barnby continued, “A lot of other institutions and banks are looking at projects like this because they see the benefit, the innovations you can get from tokenised instruments. They’re more efficient, they’re easily transferable, 24/7. We’re working on quite a few projects with similar organisations.”
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