(Bloomberg) — The U.K. plans to start issuing digital gilts within the next two years, as the government clings to technology it has been slow to adopt.
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Chancellor Rachel Reeves is expected to announce a digital broadcast trial in her speech at Mansion House to the City of London on Thursday, according to people familiar with the matter. Chancellors traditionally use the forum to announce policies to support the financial sector.
The new Labor government is working to modernize its financial markets, in this case using the blockchain technology that underpins Bitcoin to “tokenize” its public debt. The hope is that this will make trading gilts faster and cheaper.
The digital shift comes as the country’s Debt Management Office embarks on a £297 billion ($381 billion) borrowing spree, the second-largest borrowing list on record, with sales which are expected to remain high for years. Legislation may need to be introduced in Parliament for blockchain-based sales to take place, the sources said.
The Treasury declined to comment, as did a DMO spokesperson.
Stop progress
Digital bonds were launched when the Conservatives were still in power. In 2022, Treasury Minister John Glen said the department was exploring the possibility of digitizing debt issuance, although the idea was met with resistance from some OGD officials.
The Treasury is currently setting a timetable for the first digital sales of gilts. For its part, the DMO said it had advised the government on the feasibility of issuing bonds through “distributed ledger technology” in its latest annual report.
While these transactions remain niche, proponents of selling digital bonds say it will make debt raising easier by automating many processes and reducing transaction costs.
Earlier this year, Slovenia issued the eurozone’s first sovereign digital debt, while supranational institutions including the European Investment Bank and the World Bank have been dabbling in blockchain-based issuance for years .
The UK’s strategy joins that proposed by the Financial Markets Association of Europe, which represents banks trading bonds. Earlier this year, he proposed that governments integrating blockchain into their debt-raising strategy follow a phased approach, with initial “experimental” issuances to be carried out over a period of one to two years before adoption. greater sales.
–With help from Emily Nicolle.
