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UK: government pushes for government bonds on blockchain
By Davide Grammatica
“Gilts,” or government bonds issued by the UK Treasury, may soon land on the blockchain, and pushing them is the UK government itself
Tokenization: what's new in the UK
As reported recently by the Financial Times, the UK is reportedly pushing to migrate the famous “kilts,” or government bonds issued by the UK Treasury, onto the blockchain. A “government tokenization” operation desired primarily by the government itself, and in particular by Tulip Siddiq, economic secretary to the UK Treasury.
The idea is that Gilts can be issued with the support of blockchain technology, for a strategy that wants to evolve the traditional course of finance in the country in favor of efficiency.
Indeed, the whole process of issuing these bonds is complex, requiring mainly the involvement of a large number of intermediaries. Traditionally, the government borrows money from citizens or institutions by promising interest over time, but keeping track of this transaction requires the support of banks and other agents.
We agree with the City Minister that the "UK risks being left behind by global peers" if we do not move ahead swiftly to capitalise on the benefits of #Blockchain Technologies.
UK's National Blockchain Roadmap Vision 2030 recommended making evidence-based policies on Blockchain… pic.twitter.com/sVcpBlJ1D6
— The British Blockchain Association (@Brit_blockchain) October 2, 2024
Blockchain to support the state
On the one hand, Siddiq said she is convinced of the opportunity offered by blockchain to get rid of these intermediaries. On the other, the U.K. Debt Management Office (DMO), the state’s debt management agency, would still have many doubts about this idea, however.
Ideally, “tokenizing” these kilts would make their traceability a breeze, being able to easily identify any owner of a given bond at any time. The transparency that blockchain offers would also make the system much more secure, and in a much more cost-effective way.
Switching to this technology, however, would require commitment, especially to enable the system to continue running smoothly. This very point seems to be leveraged by the DMO, which has been unconvinced by this initiative (if only at this moment in history).
