UK to introduce first digitally native government bond
Treasury has announced that six banks have been a role in supporting the launch of the Digital Gilt Instrument (DIGIT), the UK’s first digitally native government bond.
DIGIT is a key part of the government’s Wholesale Financial Markets Digital Strategy and will test how distributed ledger technology can be used in UK sovereign debt issuance.
Barclays, HSBC, Lloyds, Morgan Stanley, NatWest and RBC Capital Markets have been allocated specific Lead Manager roles for the pilot issuance of DIGIT. The roles cover key parts of preparing and delivering the transaction, from documentation and bookbuilding to investor communications and helping investors access the digital platforms through which DIGIT will be available.
The Bank of England has also confirmed regulatory approval for a link between HSBC and LSEG’s Digital Securities Depositories. The world-first link will give investors the option of accessing DIGIT through either infrastructure, helping reduce fragmentation between digital platforms and support wider participation in the pilot.
What is DIGIT?
DIGIT will help the government explore how distributed ledger technology can be applied to UK sovereign debt issuance and support the development and adoption of digital financial infrastructure in the UK.
The pilot will:
- enable the government to explore how distributed ledger technology can be applied to UK sovereign debt issuance processes; and
- support the development of UK-based distributed ledger technology infrastructure and its adoption across UK financial markets.
DIGIT will be digitally native and short-dated, and will be issued on a platform operating within the Digital Securities Sandbox. It will use on-chain settlement and will sit outside the government’s main debt management programme.
The government committed at Mansion House last year to ensuring DIGIT supports interoperability between digital platforms and provides effective investor access.
Following regulatory approval from the Bank of England, the link between HSBC and LSEG’s respective Digital Securities Depositories will provide an additional way for investors to access DIGIT.
Under the arrangement, HSBC Orion will act as the issuer Digital Securities Depository, while LSEG B3 will act as an investor Digital Securities Depository.
This means investors will be able to access DIGIT through either infrastructure, helping reduce fragmentation between digital platforms and supporting broader participation in the pilot.
“Digitalisation is central to ensuring the UK remains a global hub for digital assets, and DIGIT is an important part of putting that ambition into practice,” said Lucy Rigby, Economic Secretary to the Treasury.
“Today’s announcements take us another step closer to issuing the UK’s first digitally native government bond early next year, while supporting further innovation in our financial markets.
“The world-first link between HSBC and LSEG’s platforms shows the UK is at the forefront of developing the financial infrastructure of the future,” she said.
