The UK has tapped HSBC and law firm Ashurst to lead a trial of tokenized sovereign debt, a move that positions Britain to become the first G7 country to issue a gilt on the blockchain, the Financial Times reports. The pilot—expected to launch this year—was first announced by Chancellor Rachel Reeves in late 2024 and is intended to respond to criticism that the U.K. has fallen behind other jurisdictions on digital sovereign issuance. The experiment will run inside the Bank of England’s “digital sandbox,” a controlled environment that allows fintech innovations to operate with relaxed regulatory constraints. Officials say the pilot’s chief goals are to shorten settlement times and cut operational costs for market participants by using distributed-ledger technology to record and transfer ownership of government bonds. HSBC brings hands-on experience: the bank has executed more than $3.5 billion of digital bond issues on its proprietary Orion blockchain, including a $1.3 billion multicurrency green bond in Hong Kong last year—one of the largest tokenized debt sales to date. Ashurst will provide the legal and regulatory expertise needed to structure the digital gilt and ensure compliance. Hong Kong’s example underscores the potential market benefits. At CoinDesk’s Consensus Hong Kong conference, Financial Secretary Paul Chan Mo-po said the multicurrency green bond helped boost liquidity and pledged, “We will regularize the issuance of tokenized green bonds,” signaling a policy path that could accelerate broader adoption. If successful, the U.K. pilot could pave the way for routine issuance of tokenized gilts, reshaping settlement mechanics for sovereign debt markets and offering a new on-ramp for institutional and digital-native investors. Observers will be watching both technical outcomes and how regulators translate the sandbox learnings into policy and market infrastructure. Read more AI-generated news on: undefined/news

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