Lloyds puts tokenised deposits into live cross-border payment tests

Lloyds Banking Group has completed three live tokenised deposit transactions under Project Agorá, advancing the banking industry’s effort to test whether digital representations of commercial bank money can simplify wholesale cross-border payments.

The transactions involved sterling, Swiss francs and euros and formed part of the project’s Real-Value Testing phase. Lloyds said the exercises moved beyond prototypes by using tokenised deposits in practical payment and settlement scenarios within the regulated banking system.

In the principal cross-currency transaction, Lloyds’ Corporate Markets business converted Swiss francs into sterling, while Lloyds Bank provided the sterling settlement. The foreign-exchange conversion, payment and settlement were linked so that they occurred simultaneously, rather than being handled as separate stages across different systems and institutions.

Lloyds also participated as a customer bank in separate Swiss franc and euro transactions. Collectively, the tests examined whether tokenised commercial bank deposits could support multi-currency payment flows while retaining the legal and regulatory characteristics of conventional bank money.

Project Agorá is convened by the Bank for International Settlements and the Institute of International Finance. It brings together eight central banks and more than 40 private-sector financial institutions to investigate how tokenised commercial bank deposits and central bank reserves could operate on a shared programmable infrastructure.

The initiative is commercially relevant because cross-border corporate payments commonly require payment instructions, currency conversion and settlement to pass through several systems. Bringing those stages into a coordinated transaction could reduce processing friction and the period during which one part of a payment has been completed while another remains outstanding.

Peter Left, Lloyds’ head of digital and markets innovation, said moving from prototypes to live transactions had given the group practical insight into how tokenisation could reduce friction and settlement risk. The bank has previously tested tokenised deposits, money-market fund units and UK government bonds in regulated financial-market transactions.

Project Agorá remains an experimental industry initiative rather than a commercially available payment service. However, the use of real-value transactions marks a more consequential stage in determining whether tokenised bank money can support mainstream wholesale payment and treasury operations.