Aberdeen Investments, Lloyds Banking Group and Archax have completed the first UK trade using digital assets.
Specifically, the initiative is set to advance the use of blockchain technology using tokenised real-world assets (RWAs) as collateral.
Tokenised units of Aberdeen Investment’s money market fund (tMMF) and tokenised UK gilts were used as collateral for FX trades between Aberdeen and Lloyds, while FCA-regulated digital asset exchange Archax issued, transferred, and securely held these digital tokens on the Hedera Hashgraph public permissioned blockchain.
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.”
Currently, the UK trades $5.4 trillion in FX and interest rate derivatives daily – amounting to half of global activity.
Benefits of the use of regulated digital assets as collateral includes the ability for these to be programmed to automatically follow the rules of trading agreements. This subsequently streamlines margining processes, reduces operational costs, enhances collateral efficiency, and minimises counterparty risk, said the firms.
The uptake is also set to be particularly useful in times of market volatility, with an increased adoption of tokenised funds as collateral able to reduce systemic risk by enabling digital transfers instead of forced asset sales.
Peter Left, head of digital finance at Lloyds Banking Group, explained: “This groundbreaking initiative proves that digital assets can be used in regulated financial markets under existing legal frameworks here in the UK. It’s a major step forward in demonstrating how tokenisation can enhance collateral efficiency, reduce friction, and unlock new trading opportunities.”