His Majesty’s Treasury has taken a significant step towards its goal of moving government bonds to a blockchain infrastructure. The Treasury has selected HSBC’s tokenization platform, Orion, as the official provider for a pilot program called the Digital Gilt Instrument (DIGIT). With this move, the UK is on track to become the first G7 country to issue tokenized sovereign bonds on the blockchain. The DIGIT pilot aims to test how distributed ledger technology (DLT) can be used in UK government debt processes. Through this process, the Treasury aims to both develop DLT infrastructure in local financial markets and expand the tokenization ecosystem.
What is HSBC’s role?
In a statement, HSBC emphasized that issuing digital government and corporate bonds on the blockchain could provide structural improvements in debt capital markets. In particular, it was noted that transaction settlement times could be significantly shortened. Settlement processes, which can take days in traditional bond markets, can be completed much faster thanks to on-chain settlement. As part of the DIGIT pilot, a short-term and “digitally native” government bond will be issued. This instrument will operate within the Digital Securities Sandbox and will function independently of the government’s main debt management program. Thus, the pilot will allow for the testing of an innovative model, detaching itself from the existing system.
UK Economy Secretary Lucy Rigby said the project aligns with the goal of attracting investment and making the country a more attractive place to do business. Rigby stated that DIGIT will concretely demonstrate how the UK can benefit from this technology. The government believes that financial innovation will increase competitiveness in global capital markets. HSBC shared that its Orion platform has already facilitated over $3.5 billion in tokenized bond issuances across various jurisdictions. The platform has been used in digital bond projects in various financial centers, including Hong Kong and Luxembourg. This experience provides a technical and operational foundation for the UK’s pilot program. Patrick George, Head of Global Markets and Securities Services at HSBC, stated that the UK is one of the bank's main markets. George expressed his satisfaction with contributing to the development of the bond market and, more broadly, the growth of the country's economy.
The pilot project strengthens not only the technology but also the legal infrastructure. Global law firm Ashurst has been appointed to provide legal advice in the DIGIT process. The firm's expertise in digital assets will play a critical role in terms of regulatory compliance and contractual structures.
This step by the UK is seen as part of the global trend towards the tokenization of government debt instruments. In recent years, central banks, investment banks, and governments have been conducting pilot studies to issue bonds, money market funds, and other securities on the blockchain. The aim is to reduce costs, increase transparency, and strengthen secondary market liquidity.
The DIGIT pilot is more than just a technical trial; it is part of the country's capital market strategy. If successful, it could pave the way for broader digitalization steps in the UK bond market. This could redefine London's position as a global financial center through a new generation of financial infrastructure.
