In her first Mansion House speech, UK chancellor Rachel Reeves announced a pilot program to issue digital gilts using blockchain technology.
This initiative, aimed at modernising the UK’s £2.5 trillion gilt market, leverages distributed ledger technology (DLT) to create tokenised government bonds, marking a significant step in aligning the UK’s capital markets with emerging digital finance trends.
Kelly Mathieson, chief business development officer at fintech firm Digital Asset, praised the move, noting the importance of keeping the UK market technologically competitive. “Rachel Reeves is right to recognise that the UK must modernise the technology underpinning the £2.5 trillion gilt market to make sure it’s not left behind,” Mathieson said. She pointed to successful examples in other markets, such as Euroclear and the World Gold Council’s work in tokenising gold, gilts and Eurobonds on blockchain, which demonstrated how digital assets can enhance “collateral mobility, improve liquidity, and increase transactional efficiency.”
Mathieson highlighted how digital gilts could have helped mitigate the 2022 gilt crisis, where mass gilt sales caused liquidity strains and widened margin calls. “Digitised gilts would have provided real-time collateral mobility to meet intraday margin calls,” she explained, suggesting that such technology could help avoid similar crises in the future by reducing the need for urgent mass sales.
Digital assets and DLT set to transform securities industry
Gilbert Verdian, CEO and founder of digital finance firm Quant, echoed Mathieson’s enthusiasm, highlighting the significance of this initiative amid current geopolitical challenges. “Westminster is under pressure to demonstrate its pro-growth credentials following the Autumn Budget, so it’s unsurprising to see tokenisation at the top of the agenda,” Verdian stated. He described digital gilts as “an important step in cementing the UK’s leadership position in digital finance” and emphasised their potential to make the UK capital markets more attractive to international investors by improving liquidity and streamlining debt issuance processes.
The Investment Association also welcomed the government’s innovation drive, viewing the digital gilt pilot as an essential step aligned with the Asset Management Task Force’s recommendations. “We are pleased to see the government championing innovation by delivering on its plans to introduce a digital gilt,” the Association noted, adding that as financial technology continues to advance, “speed and regulatory responsiveness will be critical to the success of these initiatives.”
Industry experts see the pilot as a promising step toward a more resilient and efficient gilt market. However, Mathieson warned that the UK must carefully select the right technology to address outdated operational issues and ensure the new system meets regulatory standards while protecting privacy and boosting liquidity.
