(Feb 12): The UK Treasury has chosen HSBC Holdings plc’s blockchain platform for the pilot issuance of the country’s digital gilt instruments, as part of plans to update the nation’s capital markets infrastructure.
Issuing bonds on blockchain could improve the structure of the UK’s debt capital markets by speeding up settlement times, HSBC said in a statement on Thursday, announcing its Orion platform had been selected.
The UK Treasury had been seeking a supplier to develop and provide services that would allow it to issue, distribute and settle digital gilts, known as DIGIT. The government intends to issue the digital instruments within a regulated testing environment managed by the Financial Conduct Authority, it said in a tender offer published in October.
The UK is one of a number of countries striving to modernise financial markets by incorporating blockchain technology. The hope is that by “tokenising” its bonds, gilt trading could become faster and cheaper. The plans also come as large financial institutions around the globe ramp up efforts to tokenize other financial instruments such as funds and stocks.
In November 2024, Chancellor Rachel Reeves had projected the UK could begin issuing digital gilts within the next two years.
HSBC’s Orion platform has been used for the issuance of over US$3.5 billion ($4.4 billion) in digitally native bonds globally. This includes the European Investment Bank’s first digital sterling bond in 2023 and the multicurrency US$1.3 billion equivalent green bond issued by the Hong Kong government last year.
See also: Malaysia plans to sell dollar bonds this year, first since 2021
While momentum around blockchain-based issuance of traditional assets has been growing, the tokenized debt market remains tiny compared to the overall market, due in part to the lack of liquid secondary markets for these assets.
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