Britain is preparing to test blockchain technology in its sovereign debt market, appointing HSBC and law firm Ashurst to lead a digital gilt pilot expected later this year.
The move puts the UK on course to become the first G7 nation to issue government bonds on a blockchain network.
The Treasury’s decision comes as pressure builds to modernise bond infrastructure and respond to competition from financial centres that have already completed tokenised sovereign debt sales.
Chancellor Rachel Reeves first unveiled the pilot plan in late 2024. The initiative is designed to explore whether distributed ledger technology can improve how gilts are issued, traded, and settled.
Other jurisdictions, including Hong Kong, have already carried out digital sovereign bond issuances, intensifying calls for faster action in London.
Digital gilt framework
The Treasury has selected HSBC as the banking partner for the trial, with Ashurst advising on legal structure and compliance.
According to the Financial Times, the appointments aim to address criticism that Britain has been slow to advance tokenised government bonds.
The pilot will test the feasibility of issuing sovereign debt on blockchain infrastructure rather than relying solely on conventional clearing and settlement systems.
If successful, it would mark the first blockchain-based sovereign issuance among G7 economies.
Officials are positioning the experiment as a technical trial rather than a permanent shift.
The results are expected to inform future decisions on whether blockchain could play a larger role in the UK government bond market.
Sandbox oversight
The programme will operate within the Bank of England’s digital sandbox. This controlled regulatory environment allows financial institutions to test new technology under modified supervisory conditions.
Running the pilot in the sandbox enables authorities to monitor operational and legal risks while keeping the broader financial system insulated from disruption. The framework is intended to balance innovation with regulatory oversight.
The sandbox structure also allows participants to assess how blockchain-based systems interact with existing market infrastructure and reporting standards.
Settlement and efficiency aims
One of the main objectives of the digital gilt trial is to reduce settlement times and cut operational costs for market participants.
Traditional bond transactions often involve multiple intermediaries and layered back-office processes.
Tokenised bonds recorded on a shared digital ledger could, in theory, allow near real-time settlement.
This may reduce reconciliation work and streamline administrative functions.
The Treasury’s trial will evaluate whether these potential gains translate into measurable efficiencies for issuers and investors in the gilt market.
HSBC’s digital track record
HSBC has prior experience in blockchain-based debt issuance. The bank has arranged more than $3.5 billion in digital bond offerings through its proprietary Orion blockchain platform.
Among those transactions was Hong Kong’s $1.3 billion green bond issued last year, one of the largest tokenised sovereign debt sales globally.
That deal demonstrated how public issuers can use blockchain infrastructure for large-scale bond transactions.
Hong Kong’s completed digital sovereign issuance underscores the competitive backdrop for the UK pilot.
By moving ahead with its own trial, Britain is signalling that it intends to remain active in the evolving market for tokenised government securities.
The outcome of the sandbox phase is expected to determine whether blockchain issuance could become a recurring feature of UK sovereign debt operations.
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