Government Debt Issuance Pilot: Distributed Ledger Technology

Monday 18th November 2024 Written Statements

[The Economic Secretary to the Treasury (Tulip Siddiq)]

My right hon. Friend the Chancellor of the Exchequer announced on Thursday 14 November at Mansion House that the Government intend to launch a pilot digital gilt instrument (DIGIT), using distributed ledger technology.

Distributed ledger technology (DLT) refers to a variety of technologies characterised by their use of networks of ledgers that update and synchronise simultaneously. DLT has the exciting potential in the long term to make transactions more efficient. DLT also brings other benefits across markets, such as automation, greater resilience, and transparency.

The Government’s intention is to work with industry to test this new technology across the life cycle of a Government debt instrument. This will enable the Government to explore the potential benefits that DLT could bring to the debt issuance process, as well as stimulate the wider development of DLT platforms and infrastructures across UK capital markets.

This issuance will support the Government’s commitment to maintaining the UK as a world leading and global financial centre. DLT is being explored with increasing ambition by other financial centres and there is potential for significant growth in the use and exchange of digital assets in the coming years. The Government acting now will help position both itself and the UK market to adapt to these changes.

This pilot aims to issue a digital bond with similar features to a conventional gilt. It will utilise the digital securities sandbox (DSS), which opened for applications in September 2024. The DSS provides a regulatory environment through which firms can use DLT to create, trade and administer securities, while being supervised by the Bank of England and the Financial Conduct Authority. It allows market participants to experiment with DLT-based market infrastructures in a controlled and monitored setting, ensuring that any potential risks are managed while fostering innovation.

The pilot is experimental in nature and, therefore, will sit outside of and be separate from the Debt Management Office’s gilt and Treasury bill operations. This will ensure that the pilot will be independent of our world-class debt management programme.

The Government will engage with the sector in the new year on what an issuance could look like and what technology options are available to facilitate an issuance.

[HCWS228]