Britain's banking sector is positioning itself for a fundamental transformation toward blockchain-based finance, according to new research from Lloyds Banking Group. A survey by the institution found that 71% of senior British finance executives anticipate tokenization will fundamentally transform financial services in the years ahead.

The findings come from Lloyds' tenth annual Financial Institutions Sentiment Survey, which gathered insights from 100 executive-level decision-makers representing British banks, insurance companies, and investment management firms. The results were published in a press release on the bank's official website.

71% of UK financial institutions expect tokenization to reshape finance pic.twitter.com/4PaRs5Q2Hm

— RWA Foundation (@RWAFoundation_) October 2, 2026

Accelerated payment processing and settlement cycles emerged as the most compelling advantage of tokenization, selected by 60% of those surveyed. An additional 41% identified superior collateral optimization and liquidity management capabilities as significant benefits. The emphasis on speed reflects a long-standing friction point in traditional finance, where cross-border payments in particular can take days to move through correspondent banking chains.

According to Lloyds, tokenization creates digital representations of traditional assets—including cash instruments, fixed-income securities, and investment funds—on blockchain-based systems. This approach enables accelerated transaction processing and automated execution when predetermined conditions are satisfied.

Rob Hale, co-head of global markets at Lloyds, emphasized that the industry must now transition from isolated pilot programs to scalable infrastructure. He noted that achieving this vision demands standardized protocols capable of bridging digital and conventional market systems.

The survey also revealed broader enthusiasm for technological innovation across the sector. 77% of participants now consider emerging technology investment a strategic growth priority, representing a substantial increase from 41% in 2025.

Lloyds has moved beyond theoretical discussions into active testing. Earlier this year, the institution partnered with Archax and Canton Network to execute what it described as the United Kingdom's inaugural public blockchain transaction utilizing tokenized deposits to acquire a tokenized UK sovereign bond.

In a more recent development, Lloyds completed a trial settling $750,000 in actual payment obligations with Visa using the USDC stablecoin, a US dollar-backed token issued by Circle. The week-long pilot transferred funds to Visa in less than one hour, functioning seamlessly during weekends and outside traditional banking operating hours.

The institution operated its own infrastructure node on the Canton Network, while Visa conducted settlement activities on a distinct public blockchain platform. This configuration tested interoperability between different blockchain ecosystems without requiring both parties to share identical network infrastructure—a practical consideration as institutions build their tokenization capabilities on different platforms.

Peter Left, Lloyds' head of digital assets, stated that conducting transactions with real funds allowed the bank to evaluate the technology's performance under genuine operational conditions.

Meanwhile, industry association UK Finance orchestrated interbank testing involving Lloyds, NatWest, Barclays, and HSBC. These experiments encompassed two residential mortgage refinancing transactions and a simulated e-commerce platform purchase, all executed using tokenized deposit instruments. In the mortgage scenarios, funds remained locked throughout the property transaction process and were released automatically upon completion. The marketplace simulation did not involve the actual transfer of physical goods, but demonstrated how the system could reserve funds pending delivery confirmation.

British government officials are advancing this transformation beyond private banking experiments. In May, the Bank of England proposed expanding settlement operating hours toward continuous 24/7 availability—a step that would extend to the broader payment system the kind of after-hours functionality Lloyds tested with Visa. A government-supported task force projected in July that British leadership in tokenized financial services could generate up to $44 billion in economic value by 2035. The task force advocated launching the UK's first tokenized sovereign bond by early 2027, and the same analysis recommended completing a comprehensive end-to-end tokenized repurchase agreement transaction by spring 2027.

Britain has also pursued enhanced coordination with the United States on the initiative. In August, both nations recommended establishing a private-sector working group to conduct year-long testing of cross-border tokenized asset transactions. Under these arrangements, regulatory authorities including the SEC, CFTC, and Bank of England would evaluate coordinated approaches to settlement systems and market infrastructure. Officials plan to assess whether stablecoins and tokenized investment funds could qualify as acceptable collateral. Taken together, the early-2027 sovereign bond target, the spring-2027 repo milestone, and the year-long cross-border testing program give observers a series of dated checkpoints for tracking the sector's shift from pilots to scalable infrastructure.

This report is based on the original article published on Blockonomi.