Policy paper

Additional Information and Engagement on the Digital Gilt Instrument (DIGIT)

Published 18 March 2025

1. Purpose

The Chancellor of the Exchequer announced on Thursday 14 November 2024 at Mansion House that the Government intends to launch a pilot Digital Gilt Instrument (DIGIT) issuance, using distributed ledger technology (DLT).

HM Treasury (HMT) and the UK Debt Management Office (DMO) are seeking information to understand what technological options are available to facilitate an issuance, and how DIGIT can be best designed to stimulate wider development and adoption of DLT infrastructure across UK capital markets.

This engagement is being undertaken to gather information about the potential technology options, the scope of services that may need to be procured and investor preferences regarding a DIGIT issuance. The outcomes will inform thinking around the optimal commercial strategy and procurement process and which regulatory regime is utilised. It is envisaged that any procurement process will likely be run in accordance with the Procurement Act 2023.

2. About HMT and the DMO

HMT is the Government’s economic and finance ministry, maintaining control over public spending, setting the direction of the UK’s economic policy and working to achieve strong and sustainable economic growth.

HMT is responsible for:

• public spending: including departmental spending, public sector pay and pensions, annually managed expenditure and welfare policy, and capital investment;
• financial services policy: including banking and financial services regulation, financial stability, and ensuring competitiveness in the City;
• strategic oversight of the UK tax system: including direct, indirect, business, property, personal tax, and corporation tax;
• the delivery of infrastructure projects across the public sector and facilitating private sector investment into UK infrastructure; and
• ensuring the economy is growing sustainably.

The DMO is an Executive Agency of HM Treasury. The main aims of the DMO are:

• to advise on and deliver the Government’s debt management strategy operating to its policy of minimising its financing cost over the long-term, taking account of risk;
• to carry out the Government’s cash management function to minimise the cost of offsetting the Government’s net cash flows over time, while operating within a risk appetite approved by ministers;
• to administer HMT’s provision of loans to local authorities for capital purposes; and
• to administer the funds of certain public sector bodies

The delivery of the pilot DIGIT issuance is being managed jointly by HMT and the DMO. HMT is the contracting authority in any commercial agreements.

3. Background

DLT is a variety of technologies characterised by their use of networks of ledgers that update and synchronise simultaneously. DLT has the potential to transform financial markets settlement and trading in the future. It is understood that some of the potential benefits of DLT infrastructure are:

• increased efficiency by making transactions faster, reducing the need for manual processes, enabling greater automation, and facilitating programmable assets;
• enhancing transparency and auditability by providing a single, accessible record of transactions; and
• improving resilience across financial markets by reducing single points of failure.

DLT use cases are being explored with increasing ambition by financial centres across the globe and there is potential for significant growth in this area in the coming years.

The UK is taking concrete steps towards supporting industry to innovate in DLT, maintaining the UK as a world-leading global financial centre, now and in the future. In September 2024 applications opened for the Digital Securities Sandbox (DSS), which enables participating firms to set up Financial Market Infrastructures (FMIs) that create, trade, and settle securities using developing technology including DLT.  The activity in the DSS, which is live and involves real transactions, is conducted in a limited way, utilising temporarily modified legislation, under the close supervision of the Bank of England and the Financial Conduct Authority (FCA). The Government can then make permanent changes to legislation based on the outcome of activity in the DSS in order to enable the continuation and scaling of relevant activities outside the DSS.

The Bank of England (the Bank) is also progressing work on exploring ways to provide central bank money settlement, which would directly interact with programmable platforms such as DLTs, including experimentation on wholesale central bank digital currency (wCBDC). The Bank published a discussion paper in July 2024 that announced experiments on a wCBDC.^{[footnote 1]}

Finally, there are also various legal initiatives aimed at providing certainty to market participants on the legal status of digital securities under English law.

Issuing DIGIT will complement these existing initiatives to support private sector innovation in DLT platforms and digital securities. The pilot aims to:

• enable the Government to explore how DLT can be applied across the lifecycle of the UK sovereign debt issuance process; and
• catalyse the development of UK based DLT infrastructure and the adoption of DLT in UK financial markets.

4. Design choices

HMT and the DMO want to understand the views of potential suppliers and the financial services sector as to what DIGIT should deliver. However, to ensure objectives are met, certain design decisions have already been taken:

• DIGIT will be an entirely new, digitally native, UK Government debt instrument. DIGIT will be a transferable security held on a DLT platform.
• DIGIT will be issued on a platform within the Digital Securities Sandbox. The choice to utilise the DSS is first and foremost because existing regulations applicable to the issuance of Government debt (the Government Stock Regulations 2004 and the Stock Transfer (Gilt Edged Securities) (CGO Service) Regulations 1985), are unsuitable for a digital issuance and need to be temporarily modified within the DSS to permit the issuance. The Bank and the FCA operate the DSS, pursuing three overarching aims: facilitate innovation, protect financial stability and protect market integrity.
• DIGIT will be short dated. The Government wants to understand, via responses obtained during this market engagement, the tenor preferences.
• DIGIT will be separate from the Government’s debt issuance programme. DIGIT will be a real but experimental issuance. This means it will be independent of the Government’s standard debt issuance processes.

It is expected that:

• DIGIT will be issued on a platform within the DSS, and suppliers will need to obtain any necessary permissions from the Bank of England and the FCA to operate in the DSS before they will be eligible for selection under the associated procurement; and
• given that the use of ‘unbacked cryptocurrencies’ or stablecoins are not within the scope of the DSS, these solutions will not be available for the purposes of the payment leg of any DIGIT transaction.

A range of services provided by different suppliers may be needed to enable the life cycle of DIGIT. In any future procurement it may be preferred to appoint a single supplier to manage these services, including those provided separately or jointly by other suppliers. However, HMT and the DMO are open to considering solutions that involve multiple suppliers, including Small and Medium Enterprises (SMEs), working together to provide different elements of the service. We would ask that potential suppliers consider the above design choices and this preference when responding to this notice.

5. Market engagement questions

HMT and DMO are seeking information from potential DLT suppliers and financial sector firms including investors to understand what technology options are available to facilitate an issuance, the scope of services that may need to be procured, investor preferences regarding a DIGIT issuance and how DIGIT can be designed to stimulate wider development and adoption of DLT infrastructure across UK capital markets.

Interested parties are invited to submit responses to the following list of questions by 11.59pm on 13 April 2025, considering the information set out in the rest of this document. Questions on the “Design of DIGIT” are designed for all respondents, in particular financial services firms and investors to provide their views. The remaining sections are aimed primarily at potential suppliers interested in providing DLT services in any future procurement process.

Interested parties only need to answer those questions that are relevant to them. However, when responding to questions, please take into account the aims of DIGIT set out in the “Background” section.

Please note that all responses to the questions in this notice will be treated by HMT and DMO as being for information only and responses will not be shared publicly. This does not preclude HMT and DMO from providing any relevant information in an anonymised and aggregated form in future material. Respondents will not be bound in any subsequent tender process by their responses.

Design of DIGIT

The questions in this section are targeted at investors and the wider financial services industry. We would like to understand in more detail how DIGIT can be successful, particularly in delivering the Government’s objective of catalysing investment and innovation in DLT platforms and markets in the UK. 

• What do you think the demand for DIGIT would be? Who would be the primary investors?
• What are investors’ expectations for DIGIT?
• How would demand be impacted by our design choices? Please outline which choices (e.g. interoperability, maturity, price, issuance size and denomination,) are the most important and why?
• How could DIGIT catalyse the development and adoption of DLT more widely? What design choices are important here?
• How important is secondary market trading to the success of DIGIT? What factors are important in the design that would help facilitate secondary market activity?
• How important is interoperability (for example, amongst different DLT platforms as well as between DLT platforms with existing infrastructure)?
• What steps should be taken by the private sector to support greater DLT adoption?
• Based on the parameters set out in this document, how long would you expect the project to take from appointing a supplier to issuing DIGIT?

DLT platform features

The questions in this section are targeted primarily at suppliers interested in providing DLT services to the Government. We would like to understand the features and design choices of platforms which are currently available or will shortly be available in the market.

• We will be issuing DIGIT through the DSS. Have you entered or are you planning to enter the DSS? If you have entered, please confirm which gate stage are you in.
• If you are planning to enter, have you already engaged with the Bank of England and the Financial Conduct Authority concerning applying to join the DSS?
• Does your platform have permissions to operate in overseas jurisdictions? If so, please provide details.
• What is the governing law of your platform? How is this applied?
• Please describe the DLT model used on your platform (including details of the underlying blockchain, consensus mechanism, permission features (public / private / permissioned), key functionality, security, and any other relevant features – you may submit diagrams to support your responses).
• How is trust established between nodes on your platform? Please provide a basic overview of platform governance arrangements.
• Who owns the intellectual property associated with your platform?
• Does your platform facilitate access to data (e.g., by issuers / regulators / investors)?
• What is the intended profile of existing investors on your platform? How will new investors access your platform?
• Do you expect to provide relevant services to the Government alone, or as part of a group of providers covering different aspects of the necessary services? If the latter, how would you expect the services to be divided, and who would you expect to lead the group as a “single supplier” for the Government?
• Can your platform link to legacy or other DLT platforms? If so, how?
• Please provide an overview of digital security issuance steps using your platform. Please explain any customisable features.
• What payment, settlement, and custody models does your platform support (for both the cash and securities legs of a transaction)?
• Does your platform use digital token identifier or ISINs, or both? Who has responsibility for creating these?
• Does your platform support secondary market trading? If so, how would you propose to onboard participants? How long will this take?
• What costs does your platform charge or intend to charge issuers and / or investors? If you would be providing services as part of a group of suppliers, please identify all costs that should be expected to apply.
• What range of securities does your platform support?
• What are your plans to offer DLT services to the UK market?
• Is your platform already available for issuance and/or other services relating to live digital securities issuances? If not, how long will it take to establish?
• Do you have information relating to the environmental impact of your current or planned platform? Do you have a sustainability report or similar that you can share?
• What is the extensibility of your platform to other issuances with greater complexity, including by other issuers? Are there plans to develop your platform over time?

Data / Security

The questions in this section are targeted primarily at firms interested in providing DLT services to the Government. We would like to understand how appropriate data and security measures are going to be maintained in respect of those services.  

• How does your platform ensure compliance with existing consumer onboarding regulations such as know-your-customer and other anti-money laundering requirements?
• What processes and mechanisms will be implemented to onboard and identify participants?
• Could a form of digital identity be utilised as part of this issuance? If so, what would be the benefits, and what solutions are available?
• What protections do you or will you have in place against cyber-attacks on your platform? In response, please set out all relevant information concerning your cyber security processes and protocols.
• What other technology and operational resilience frameworks and processes do you have or plan to have in place to support the platform?
• How do you validate data on your platform?

Relevant experience

The questions in this section are targeted primarily at firms interested in providing DLT services to the Government. We would like to get a preliminary understanding of how potential suppliers would work with HMT and the DMO.

• What relevant experience do you have, either in developing DLT services or supporting digitally native securities issuances? Please provide detailed information setting out your previous work in response to this question.
• What expertise do you have in running and coordinating a transaction delivery involving a broad set of highly interested and engaged stakeholders, including end-investors and intermediaries?
• Do you have experience in managing multiple suppliers on behalf of your client? Please provide examples.
• The Government considers how its procurement activities might add additional social value to the community. Outside of the key project deliverables, how would you support the Government’s mission to kickstart economic growth, provide fair work, and develop skills in growth industries.

Any other information

• Outside of the questions above, are there any other areas the Government should be considering in taking forward a DIGIT pilot issuance?

6. Process and Indicative Timetable

HMT and the DMO are seeking responses by 11.59pm on 13 April 2025. Responses should be submitted via email to DIGIT@hmtreasury.gov.uk. Participation is at each participant’s own cost and no expense in responding will be reimbursed by HMT.

This represents the first stage of the procurement process and will inform our thinking about what the optimal commercial strategy will look like.  We anticipate that the next stage will be to develop a statement of requirements that can be published as part of a tender pack and to develop our thinking on the procurement process that will be followed.

HMT and DMO will be procuring services under the applicable UK law and will be working to the following indicative timetable:

Milestone	Date
Deadline for responses	11.59pm 13 April 2025
Publication of tender notice and issuing Invitation to Tender	Late Spring 2025
Selection of successful supplier / s	Late Summer 2025

1. The Bank of England’s approach to innovation in money and payments, Bank of England, July 2024 ↩