The UK government has launched a pilot to issue tokenised government bonds — dubbed the Digital Gilt Instrument (DIGIT) — using HSBC’s blockchain platform, marking a tangible step toward testing whether distributed ledger technology can make sovereign debt markets faster, cheaper and more secure. What’s happening - The pilot will issue short-dated digital gilts inside a regulatory sandbox overseen by UK financial regulators. That lets officials test issuance, transfer and settlement on a distributed ledger while leaving the primary debt system unchanged. - HSBC’s Orion platform has been selected to run the experiment. Orion has supported tokenised bond projects overseas and was chosen for its ability to handle transactions at scale. - Legal support for the program will be provided by law firm Ashurst LLP, reflecting the legal and regulatory complexity of tokenised, regulated debt issuance. Why it matters - The government is using the pilot to evaluate whether blockchain can deliver real efficiency gains — faster settlement, lower costs for firms, and improved security — rather than adopting a technology for novelty’s sake. - Officials will assess operational and legal issues that matter to incumbent market participants: custody, secondary-market accessibility, reconciliation between on-chain records and central books, settlement speed, and how automated processes manage the full bond lifecycle (including any taxable events). - Results will influence whether tokenised debt could be scaled more broadly in the UK, and what changes to operational or legal frameworks would be required. Who’s involved and how the process unfolded - The Treasury reportedly reviewed proposals from HSBC, the London Stock Exchange and various fintech firms before choosing HSBC’s Orion, a decision shaped by regulators’ preference for a cautious, “no surprises” approach to trials in tokenised debt. - Sources say the extra time taken to plan the pilot allowed the Treasury to ensure realistic issuance conditions in the sandbox without risking market stability. Official reaction - UK Economic Secretary to the Treasury Lucy Rigby tweeted that “Today we’ve taken an important step towards issuing GB’s 1st Digital Gilt Instrument,” adding she looked forward to “working with HSBC and other parties to deliver DIGIT.” Market response and next steps - Banks and institutional investors are watching closely. Their priority: solutions that plug into existing Treasury and clearing operations without adding undue risk. - The pilot’s success will be judged on measurable efficiency gains and legal clarity. If DIGIT proves robust and operationally sound, it could set the stage for wider adoption of tokenised debt in the UK as part of a broader push to keep the country competitive in capital markets and attract investment. What to watch - Findings on settlement speed, custody arrangements and secondary-market trading. - How regulators and tax authorities treat on-chain events in practice. - Any recommended changes to law or market infrastructure to enable scaling. This pilot won’t change the gilt market overnight, but it’s a concrete, regulator-led test of whether tokenisation can be safely integrated into sovereign debt issuance. Read more AI-generated news on: undefined/news