UK financial institutions expect tokenization to reshape financial services

Nearly three-quarters of major UK financial institutions expect tokenization to reshape financial services, as banks and asset managers increasingly explore blockchain-based infrastructure for payments, settlement and liquidity management.

The finding comes from an annual survey by Lloyds Banking Group, the UK’s largest financial services provider, which polled 100 senior decision-makers across major UK banks, insurers, asset managers and financial sponsors.

Faster payments and settlement emerged as the biggest potential benefit, cited by 60% of respondents, while 41% pointed to improved collateral and liquidity management.

Lloyds said moving assets and payments onto digital infrastructure could also free up capital and liquidity tied up in financial transactions, allowing institutions to deploy those resources elsewhere.

“The next phase is about turning those individual use cases into infrastructure that works at scale, with the interoperability and common standards needed to connect digital and traditional markets,” said Rob Hale, co-head of global markets at Lloyds.

Lloyds has also tested the technology directly. Earlier this year, the bank worked with Archax and Canton Network on what it described as the UK’s first public blockchain transaction using tokenized deposits to purchase a tokenized UK government bond.

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UK builds infrastructure for tokenized finance

The survey comes as UK policymakers push to move tokenization beyond pilot projects and into the country’s financial infrastructure.

The Bank of England proposed extending its core settlement infrastructure toward near-24/7 availability in May, while a subsequent government payments blueprint called for tokenized and traditional forms of money to operate within an interoperable payments system.

In July, a government-backed industry task force estimated that leadership in tokenized finance could add as much as 33 billion British pounds ($44 billion) to the UK’s annual economic output by 2035, while calling for the country’s first tokenized government bond by early 2027.

UK tokenization economic opportunity by 2035. Source: UK Wholesale Markets Digital Strategy

The UK has also sought greater coordination with the US on tokenized finance. That same month, the US and UK treasuries recommended creating a private-sector group to test cross-border uses of tokenized assets and urged US financial regulators and the Bank of England to identify shared approaches to their regulation.