Tokenising the gilt: what the UK’s digital bond pilot could mean for sovereign debt
By Cygnus | 12 Feb 2026
Summary
The UK government has appointed HSBC’s Orion platform to support its Digital Gilt Instrument (DIGIT) pilot under the Digital Securities Sandbox, marking a measured step toward testing distributed ledger technology in sovereign debt markets. The initiative will issue digitally native, short-dated government bonds in a controlled environment, allowing policymakers to assess operational efficiency, legal enforceability and settlement innovation without altering the core gilt market.
London, Feb 12 — HM Treasury’s decision to select HSBC’s Orion platform for its Digital Gilt Instrument (DIGIT) pilot represents one of the most significant technology experiments in the UK sovereign debt market in recent years.
The pilot, which will operate within the UK’s Digital Securities Sandbox (DSS), is designed to test whether distributed ledger technology (DLT) can support the issuance, settlement and lifecycle management of short-dated government bonds.
Officials have emphasised that the initiative is a limited pilot that will run separately from the UK’s primary debt management programme.
What the DIGIT pilot aims to test
Unlike conventional gilts — which are issued and settled through established central securities depositories and clearing systems — the DIGIT pilot will involve bonds that are digitally native to a distributed ledger platform.
The objectives include evaluating:
- Settlement innovation: Exploring whether DLT infrastructure can enable near real-time or same-day settlement, compared with current market standards.
- Operational efficiency: Assessing whether automation through programmable workflows can reduce administrative processes.
- Legal certainty: Ensuring that digital instruments remain fully aligned with UK sovereign debt law.
- Market resilience: Testing system robustness in a regulated sandbox environment before any broader application.
The Treasury has made clear that the pilot does not replace existing gilt issuance structures and will operate independently to safeguard financial stability.
From T+2 to near real-time settlement
In traditional government bond markets, settlement typically occurs one or two business days after trade execution. During that interval, counterparties remain exposed to settlement risk.
DLT-based systems allow for the potential of synchronised delivery-versus-payment mechanisms — sometimes referred to as “atomic” settlement — where asset transfer and payment occur simultaneously.
While such mechanisms may reduce certain forms of settlement risk and operational friction, they do not eliminate broader market risks such as liquidity stress or valuation volatility.
The pilot will examine how such functionality performs within the UK regulatory framework.
Why HSBC Orion was selected
HSBC’s Orion platform has previously supported digital bond issuances involving sovereign, supranational and corporate borrowers. According to HSBC, the platform has facilitated more than $3 billion in digital bond transactions globally.
The selection followed a competitive process, with Orion chosen to provide the distributed ledger infrastructure for the pilot.
HSBC executives have described the initiative as an opportunity to support innovation in public capital markets, though performance metrics from the DIGIT pilot will only emerge after implementation.
Institutional approaches to digital bond infrastructure
The appointment of HSBC Orion also highlights differing approaches within the institutional digital bond ecosystem. Platforms such as Goldman Sachs’ GS DAP® have adopted alternative architectural designs reflecting distinct technical priorities.
Architectural comparison
| Feature | HSBC Orion | Goldman Sachs GS DAP® |
|---|---|---|
| Core Protocol | Permissioned distributed ledger | Canton Network / Daml smart-contract framework |
| Design Focus | Interoperability with existing post-trade systems | Programmable asset logic and privacy-enabled synchronisation |
| Settlement Model | Designed to operate alongside traditional settlement infrastructure | Supports synchronised delivery-versus-payment mechanisms |
| Market Integration | Aligns with established institutional workflows | Built for cross-network smart-contract execution |
| Strategic Emphasis | Gradual integration into existing market architecture | Expansion of programmable financial ecosystems |
These differing models reflect broader experimentation across capital markets infrastructure — whether to prioritise incremental interoperability with legacy systems or deeper automation through programmable contract logic.
The legal dimension
HM Treasury has appointed Ashurst LLP as legal adviser for the pilot.
One of the central questions surrounding digital securities is how ownership rights are defined and enforced when instruments are recorded on a distributed ledger rather than within traditional registry systems.
The legal framework underpinning DIGIT is intended to ensure that holders of digital gilts have the same rights and protections as investors in conventional UK sovereign debt.
Implications for liquidity and collateral markets
Government bonds form the backbone of repo and collateral markets. Changes in settlement timing and asset mobility can influence how financial institutions manage liquidity and margin requirements.
Near real-time settlement may reduce operational frictions in certain transactions. However, the broader functioning of repo markets depends on capital rules, funding conditions and macroeconomic factors beyond settlement infrastructure alone.
The pilot will therefore provide data on operational efficiencies rather than systemic transformation.
A measured step in financial modernisation
The UK has sought to position London as a centre for digital asset innovation through regulatory initiatives such as the Digital Securities Sandbox and the broader Edinburgh reforms.
The DIGIT pilot should be viewed as a controlled infrastructure experiment rather than a wholesale restructuring of the gilt market.
If successful, it could inform future decisions about how distributed ledger technology might be incorporated into sovereign debt issuance. If not, the sandbox framework allows for recalibration without affecting core market stability.
Why this matters
Sovereign debt markets are foundational to the global financial system. Even incremental improvements in issuance efficiency, transparency and settlement processes can influence funding costs and operational resilience.
As governments explore digital asset infrastructure, the key questions are not only technological but legal and systemic: can digital bonds deliver efficiencies without introducing new risks?
The UK’s approach — testing digitally native sovereign instruments within a regulated sandbox — reflects a cautious but forward-looking strategy. The results could shape how other advanced economies evaluate blockchain-based issuance in public finance.
FAQs
Q1: What is the Digital Gilt Instrument (DIGIT)?
DIGIT is a UK government pilot programme designed to test digitally native sovereign bonds issued on distributed ledger infrastructure.
Q2: Will this replace traditional gilts?
No. The pilot operates separately from the UK’s main debt management programme and is intended for testing purposes.
Q3: What is the Digital Securities Sandbox?
The DSS is a regulatory framework that allows firms and authorities to test digital securities infrastructure under controlled supervision.
Q4: What is “atomic” settlement?
It refers to simultaneous exchange of an asset and payment on a distributed ledger, reducing certain settlement timing risks.
Q5: Who is providing legal oversight?
Ashurst LLP has been appointed to advise on the legal framework supporting the pilot.
Q6: When will the pilot go live?
HM Treasury has not yet announced a specific issuance date.
