Today the Chancellor of the Exchequer Rachel Reeves announced the kick off for the government’s program for its Digital Gilt Instrument (DIGIT), starting with procurement. Last year the Labour government confirmed plans to issue digitally native government bonds using blockchain as part of the Digital Securities Sandbox, a temporary testing environment that relaxes a few laws.
“The UK is leading the way on digital innovation, and the creation of DIGIT will help to transform our world-leading capital markets sector and drive economic growth,” said Chancellor Reeves.
It published a set of questions targeted at potential suppliers and market participants, especially investors, to find out what they are looking for. Responses should be submitted by 13 April with a tender process in the late spring, and selection expected in the late summer.
The short-dated gilt will be issued outside the government’s conventional debt issuance program, and will not be issued by the Debt Management Office. Given the gilt will be hosted on a platform that’s part of the Sandbox, to take part in the issuance program, the platform will first need approval from the Bank of England and Financial Conduct Authority that are jointly operating the Sandbox.
HM Treasury reiterated that cryptocurrencies and stablecoins will not be part of the DSS and hence cannot be used for settlement. There is one very obvious candidate for settlement – Fnality, the UK regulated wholesale payment system owned by numerous banks and institutions.
We previously noted that with the gilt being part of the Sandbox, it could support various experiments, especially those requiring high quality collateral such as tokenized repo.
