UK tokenized gilt program advances, on-chain cash settlement becomes a key bottleneck

Deep Tide TechFlow message: On July 22, according to CoinDesk, the UK government plans to complete the first test issuance of tokenized sovereign bonds in early 2027 through HSBC and the London Stock Exchange Group (LSEG). However, industry experts say that on-chain cash settlement issues remain the core obstacle preventing the plan from being implemented.

Varun Paul, global head of central banking and financial market infrastructure at Fireblocks, said the project has already garnered sufficient institutional support. The change in government (UK Prime Minister Keir Starmer replaced by Andy Burnham) is unlikely to reverse it, and tokenized government bonds are expected to boost market demand given the UK’s current debt level of nearly £3 trillion (about $4 trillion).

Jannah Patchay, founder of Markets Evolution, said tokenized bond technology has been validated for nearly seven years since Santander Bank issued the first tokenized pound sterling corporate bond in 2019, but the persistent lack of on-chain counterparty-risk-settlement assets has never been resolved. She called on regulators to promote the use of compliant GBP stablecoins to provide an on-chain settlement mechanism. The global stablecoin market size is currently $300 billion, but TGBP—the largest GBP stablecoin by market cap—only accounts for about $34.2 million, a very small share.