UK Enters Next Phase of Blockchain-Based Tokenized Gilt Project

• The U.K. is accepting proposals for its blockchain-based DIGIT project to tokenize government bonds.
• Real-world asset tokenization is projected to become a multi-trillion-dollar market by 2030.
• Major economies, including the U.S. and EU, are exploring tokenized government bonds.

The U.K. is moving forward with its Digital Gilt Instrument (DIGIT) initiative, opening the procurement phase to evaluate potential partners and service providers.

The project, led by Chancellor Rachel Reeves, aims to tokenize U.K. gilts—government bonds—on blockchain to improve efficiency and transparency in the country’s £2.5 trillion ($3.2 trillion) bond market.

Seeking Proposals for DIGIT

The U.K. Treasury is now seeking proposals from tech firms and blockchain developers to support a DIGIT pilot. Reeves emphasized the U.K.’s commitment to digital innovation, stating:

“The U.K. 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.”

Launched in November 2024, the project aims to reduce settlement times and costs while aligning with the growing trend of real-world asset (RWA) tokenization.

By converting bonds into traceable tokenized assets on the blockchain, transactions settle significantly faster at a fraction of the cost—at least in practice. However, this depends on how the final project is designed and implemented.

Now, companies can submit proposals and initiate a potentially competitive bidding process.

The Treasury plans to select a supplier within the next three to six months, followed by a two-year trial phase.

Why Gilts?

Gilts are government bonds. They’re essentially the U.K. equivalent of U.S. Treasury bonds.

They’re a low-risk investment with a low but steady rate of return that also pays ‘coupons,’ i.e., dividends.

Gilts are attractive from a tax perspective as profits are entirely exempt from capital gains tax (CGT).

In addition, gilts held in stocks and individual savings accounts (ISAs)—most akin to the U.S. Roth IRA—are offered tax exemptions. Gilts in self-invested personal pensions (SIPPs) are offered the same tax perk.

The concept of tokenizing bonds isn’t unique to the U.K.; in fact, it appears to be playing catch-up with the global trend of real-world asset (RWA) tokenization.

It’s considered to be a market with trillion-dollar potential, as now the likes of SWIFT, BlackRock, and other major firms and entities actively adopt and develop the tech.