Blockchain technology is no longer just for crypto traders and tech enthusiasts. Big banks are now using it to solve real problems—and Lloyds Banking Group is leading the charge. While most people are watching Bitcoin prices and meme coins, Lloyds is quietly building a future where banking is faster, safer, and more efficient.

In late 2025, Lloyds CEO Charlie Nunn revealed that the bank had successfully tested tokenized deposits across the UK. These are digital versions of your regular bank deposits, stored securely on a blockchain. The full rollout is planned for 2027. Nunn said this new tech, especially when combined with artificial intelligence, could cut down the time it takes to buy a home from weeks to just a few days. It could also remove the need for middlemen in the mortgage process—much like how smartphones changed how we communicate.

Lloyds isn’t alone. Other financial giants like JPMorgan and BlackRock are also bringing blockchain into traditional finance. But instead of trying to replace banks like decentralized finance (DeFi) platforms do, these institutions are using blockchain to improve what they already offer.

**Tokenized Deposits vs. DeFi Lending**

Lloyds’ main focus is on tokenized deposits—digital assets backed by real money and recorded on a blockchain. These aren’t just crypto coins; they’re controlled, secure, and regulated. In September 2025, UK Finance launched a trial with six major banks, including Lloyds, to test how tokenized payments could speed up processes like remortgaging and fraud prevention.

On the flip side, decentralized platforms like Aave offer lending and borrowing without any central authority. By May 2025, Aave handled about $25.4 billion in assets, making up nearly half of all DeFi activity. Everything happens automatically through smart contracts—no paperwork, no approvals, just code.

DeFi is fast and open to anyone with internet access and a crypto wallet. But it comes with risks. If you lose your login keys or fall victim to a hack, there’s no one to call for help. Billions have been lost due to bugs and scams in the DeFi world.

That’s why banks like Lloyds think they can offer the best of both worlds: speed and efficiency from blockchain, but with the safety net of regulation and customer protection. Tokenized deposits could allow instant transactions while still being insured and traceable if something goes wrong.

**Real-World Asset Tokenization Grows Fast**

Lloyds is also exploring other uses for blockchain. In July 2025, it completed a major transaction using tokenized UK government bonds and money market fund units as collateral for foreign exchange trades. This was done on Hedera Hashgraph, a secure blockchain platform. It marked a big step forward for regulated digital finance.

Tokenizing real-world assets is one of the fastest-growing areas in blockchain. Assets in tokenized money market funds jumped from $4 billion at the start of 2025 to $8.6 billion by November. JPMorgan launched its own tokenized fund on Ethereum with $100 million, while BlackRock’s BUIDL fund reached $2 billion.

Unlike synthetic assets in DeFi—which mimic real assets without actually holding them—these tokenized products are backed by actual securities stored by trusted institutions. That makes them much more appealing to large investors who need clear legal ownership and strict compliance.

**Different Goals, Different Strengths**

When comparing traditional banks using blockchain versus DeFi platforms, it’s clear they serve different purposes.

DeFi shines when it comes to accessibility and innovation. Anyone around the world can use it without needing approval from a bank. You have full control over your money, and developers can launch new ideas quickly. But it also comes with risks like theft, bugs, and lack of regulation.

Traditional banks using blockchain aim for safety, compliance, and better service for everyday users. Their systems are slower to change but offer protections that many people trust—like deposit insurance and customer support.

Lloyds’ plan to use tokenized deposits for mortgages shows this clearly. Sure, someone could try to build a decentralized mortgage service—but would buyers or regulators trust it? Probably not yet. Lloyds wants to keep the traditional protections in place while making everything work faster and smoother with blockchain tech.

**Merging TradFi and DeFi**

The real story isn’t about traditional finance versus decentralized finance—it’s about how both are starting to connect. In 2025, JPMorgan partnered with Chainlink and Ondo Finance to bridge these worlds. BlackRock’s tokenized fund is now accepted as collateral on crypto exchanges.

These connections between traditional finance (TradFi) and decentralized finance (DeFi) are growing quickly. Lloyds’ aggressive push into blockchain shows that big banks see Web3 as an opportunity—not a threat.

By 2027, if Lloyds successfully launches tokenized deposits across its network, it could set a new standard for retail banking in Europe and beyond. While some crypto fans say banks are missing the point of decentralization, others see this as solving real-world problems in a safer way.

Not everyone wants to be their own bank. Most people just want banking that’s faster, cheaper, and more reliable. If blockchain can deliver that through regulated institutions like Lloyds, it may be the version of blockchain finance that reaches the masses first.

The future of finance isn’t about choosing between TradFi or DeFi—it’s about how both can evolve together to meet different needs. With Lloyds betting big on blockchain infrastructure, we’ll soon see whether this hybrid approach can truly deliver better banking for everyone.