Recent initiatives from Lloyds Bank and London Stock Exchange Group highlight how tokenised commercial bank money is being positioned for regulated post-trade and settlement use cases.
Two closely timed announcements from the UK market point to a maturing approach to tokenised cash and its role in regulated financial market infrastructure. Lloyds Banking Group has completed the UK’s first gilt transaction using tokenised deposits on a public blockchain, while London Stock Exchange Group (LSEG) has launched Digital Settlement House (DiSH), a new service designed to enable real-time settlement using commercial bank money across on- and off-chain networks.
Taken together, the developments suggest that tokenised commercial bank money is moving beyond isolated proof-of-concept activity and toward a more systematic role in post-trade and settlement workflows.
Lloyds executes UK-first tokenised gilt transaction
Lloyds Bank has completed what it describes as the UK’s first purchase of a gilt using tokenised deposits issued on a public blockchain. The transaction involved Lloyds Bank PLC issuing tokenised sterling deposits on the Canton Network, a blockchain designed for regulated financial markets. Lloyds Bank Corporate Markets then used those deposits to purchase a tokenised gilt from Archax.
Following the transaction, Archax transferred the underlying funds back into its standard Lloyds bank account, demonstrating interoperability between blockchain-based settlement and traditional banking infrastructure. Lloyds also operated its own validator node on the Canton Network, maintaining control over transaction verification and security in line with its existing standards for managing customer deposits.Lloyds positioned the transaction as a demonstration of how traditional assets such as gilts can be represented and settled digitally, while preserving the regulatory and economic characteristics of commercial bank deposits, including interest-bearing status and depositor protection.
“Clients are increasingly demanding faster payments, settlement, and an ‘always-on’ market,” observes Surath Sengupta, Head of Transaction Banking Products at Lloyds, in conversation with TradingTech Insight. “There is also a discussion about how we can move very easily between digital and traditional assets. Crucially, they need the ability to move fluidly between digital and traditional assets. The goal is to allow clients to purchase both asset types within a single, seamless experience.”
Tokenised deposits as regulated on-chain cash
The Lloyds transaction highlights growing interest in tokenised deposits as a form of on-chain cash that remains firmly within existing banking and regulatory frameworks. Unlike stablecoins, which are typically issued by non-bank entities and backed by reserve assets, tokenised deposits represent a direct claim on a regulated commercial bank and remain part of the traditional deposit system.
“While we recognise that various digital assets will play a role, tokenised deposits are digital copies of commercial deposits, retaining all the same regulated features,” says Sengupta. “TThis includes FSCS protection, which offers the security of a traditional deposit alongside the speed of digital payments. Is this the only solution? We continue to explore alternatives, but for now, the regulatory compliance and customer protection offered by tokenised deposits make them our preferred choice to start our journey.”
In this case, the use of tokenised deposits enabled near-instant settlement on blockchain infrastructure while maintaining compatibility with conventional cash management and accounting processes. The approach is positioned as particularly relevant for institutional use cases, where regulatory certainty and integration with existing systems remain critical.
The transaction also builds on earlier work between Lloyds and Archax involving the use of units of a tokenised money market fund as collateral, indicating a broader exploration of tokenisation across both cash and securities.
LSEG launches Digital Settlement House
Shortly after the Lloyds announcement, LSEG unveiled Digital Settlement House (DiSH), an open-access digital settlement service intended to support programmatic, instantaneous settlement across multiple payment networks. The service is designed to enable payment-versus-payment (PvP) and delivery-versus-payment (DvP) settlement using commercial bank money, operating both on-ledger and across connected external networks.
At the core of the service is DiSH Cash, a ledger-enabled commercial bank money solution. Through DiSH Cash, participants hold commercial bank deposits at banks within the DiSH network, with ownership recorded on the DiSH ledger. This structure is intended to enable 24/7 movement of commercial bank money across currencies and jurisdictions.
LSEG stated that the service can facilitate settlement directly on its own ledger or act as a notary to coordinate settlement across other digital and traditional infrastructures. The launch follows a proof-of-concept conducted with Digital Asset and a consortium of financial institutions, which completed multi-asset, multi-currency transactions on the Canton Network using tokenised commercial bank deposits as the cash leg.
Commenting on the launch, Daniel Maguire, Group Head, LSEG Markets and CEO, LCH Group, says: “LSEG DiSH expands the tokenised cash and cash like solutions available to the market, and for the first time, offers a real cash solution tokenised on the blockchain utilising cash in multiple currencies held at commercial banks. This innovative service will enable users to reduce settlement risk, and integrate existing cash, securities and digital assets across new and existing market infrastructure.”
A shared architectural direction
Although the Lloyds transaction and the LSEG DiSH launch address different layers of the market stack, both rely on a similar architectural approach. Each uses commercial bank money as the settlement asset and the Canton Network as an environment for coordinating transactions in a regulated context.
“We used a public blockchain to drive mass industry adoption through greater accessibility, moving beyond the private networks used in previous transactions,” explains Sengupta. “We chose the Canton Network because it is designed for regulated financial institutions, offering privacy on a public chain. By running our own validator node, we verify transactions and ensure customer resources are managed with the same security standards as traditional cash deposits.”
The Lloyds transaction provides an execution-level demonstration of how tokenised deposits can be used to settle a sovereign debt instrument. LSEG’s DiSH, by contrast, is positioned as an infrastructure layer designed to support such settlement activity at scale, across asset classes and networks.
This alignment suggests a broader industry focus on extending existing forms of bank money into programmable settlement environments, rather than introducing new monetary instruments. For banks and market infrastructure providers, this approach offers a path to modernising settlement processes without relying on wholesale central bank digital currencies or crypto-native stablecoins.
Implications for post-trade and liquidity management
Both announcements place settlement and post-trade workflows at the centre of tokenisation efforts. By enabling near-real-time DvP and PvP, tokenised commercial bank money could reduce settlement risk, compress settlement cycles, and improve intraday liquidity management.
LSEG has highlighted the potential for DiSH to unlock trapped assets and support new approaches to intraday liquidity and collateral usage, while Lloyds has pointed to instant settlement and automation as key benefits for institutional users.
Rather than focusing on trading venues or retail use cases, the initiatives point to post-trade infrastructure as the most immediate area where tokenisation can deliver tangible operational benefits.
From controlled use cases to broader adoption
While both initiatives are framed as controlled deployments, the announcements indicate growing confidence in tokenised cash as a foundation for future market infrastructure. The remaining challenges are less about technical feasibility and more about adoption, integration, and operating at scale across participants and jurisdictions.
For the UK market, the combination of a bank-executed tokenised gilt transaction and an exchange group launching a dedicated digital settlement service suggests that tokenisation is beginning to move from experimentation toward integration. The pace of that transition will depend on regulatory alignment, operational readiness, and the willingness of market participants to adopt new settlement models built on familiar forms of commercial bank money.
“The potential applications are vast,” suggests Sengupta. “From a treasurer’s perspective, increasingly, items on a balance sheet can be tokenised for buying and selling. It is fascinating to see how this is evolving. It also feeds into the government’s digital programme; having now tokenised and purchased a Gilt, we can contribute valuable data to that initiative. The positive impacts of this are far-reaching.”
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