The UK will issue its first digital gilt no later than the first quarter of 2027, and plans to make it usable as collateral in tokenized repo, tying a sovereign bond on blockchain to a wider effort to build tokenized wholesale markets in the City of London.
Rachel Reeves told her Mansion House audience on 14 Jul that Britain is set to become the first G7 country to issue a digital sovereign bond, with HSBC confirmed as platform provider. The issuance, known as the Digital Gilt Instrument or DIGIT, will sit inside the Digital Securities Sandbox run by the Bank of England and the Financial Conduct Authority.
Digital gilt meets repo
A digital-only gilt on its own would be a narrow experiment. An asset that can be posted as collateral in tokenized repo is closer to a test of whether blockchain-based markets work.
Repo is the short-term lending market where securities are exchanged for cash and later repurchased, and it is among the systems the rest of global finance rests on. If tokenized assets are to move beyond pilots, they need to function in markets like repo, where collateral mobility, settlement speed and legal certainty decide whether anything trades at all.
A report published a day before the speech by Chris Woolard, the former interim chief executive of the FCA who now serves as the government's Wholesale Digital Markets Champion, made an end-to-end repo transaction on blockchain the first task for a new industry taskforce whose members include BlackRock, Goldman Sachs, JPMorgan and Morgan Stanley, using DIGIT or privately issued assets depending on availability.
Sandbox carries first test
HSBC will provide the platform through HSBC Orion, its tokenized securities system, operating inside the sandbox. The sandbox lets firms test digital securities infrastructure under adjusted regulatory conditions while the Bank and the FCA watch for risks.
DIGIT would be a first for issuance rather than for gilts on blockchain. Lloyds executed a gilt trade on a blockchain in January.
Reeves, who told the audience that her decisions as Chancellor had provided a platform for the next Prime Minister, said there were "plans for future issuance to come." The government's own strategy update, published hours before she spoke, was more cautious, describing further issuances as potential and subject to the success of the first transaction.
The same firms are already further on elsewhere. On Wednesday, hours after Reeves spoke, the Depository Trust & Clearing Corp, the clearinghouse that settles nearly every securities trade in the US, began its first live tokenized trades, covering collateral transfers, repo and equities. Almost 40 firms took part, among them BlackRock, Goldman Sachs and JPMorgan. Its commercial service opens in October.
The Treasury is presenting the programme as momentum. Whether it becomes one depends on a single deal that has not yet happened.
(Updated with DTCC announcement).
