The United Kingdom (UK) plans to begin issuing digital gilts in the next two years as the government adopts blockchain technology to modernize its financial markets.
The government seeks to modernize financial markets by “tokenizing” government debt, enhancing trading efficiency, and reducing costs in the UK’s extensive debt market, which is preparing for a borrowing round estimated at £297 billion ($382 billion).
The announcement aligns with the new Labour government’s goal of modernizing financial markets by “tokenizing” government debt on a blockchain, a system similar to that used by cryptocurrencies like Bitcoin.
According to a Bloomberg report, Chancellor Rachel Reeves is expected to announce a trial of digital gilt issuance during her Mansion House speech on Thursday, an occasion traditionally used to reveal financial industry support policies.
The previous Conservative government initially floated the plan to issue digital bonds. In 2022, former Treasury Minister John Glen indicated the department was considering the feasibility of digital debt issuance.
The government hopes to improve trading speed and reduce costs by digitizing gilts. This will benefit the country’s vast debt market as it prepares for a borrowing spree estimated at £297 billion ($382 billion), the second largest in UK history.
Earlier this year, Slovenia became the first eurozone country to issue sovereign digital debt, joining global institutions like the European Investment Bank and the World Bank that have tested blockchain-based issuance.
With digital bonds still in the niche, UK officials are cautiously mapping out a phased approach, with initial trials planned before large-scale issuance. Globally, digital bond issuance is also gaining traction.
Now, the Treasury has begun formal preparations for digital gilt sales, with the Debt Management Office advising on the feasibility of using distributed ledger technology, as reported in its latest annual report.
