HSBC and LSEG plan depository link for UK digital gilt pilot

HSBC and London Stock Exchange Group have agreed to work on a bilateral digital securities depository link for HM Treasury’s Digital Gilt Instrument pilot, Finextra reported. The connection is intended to give investors a choice of infrastructure for holding the instrument, with the first transaction on HSBC Orion expected by the first quarter of 2027, according to the report.

The arrangement centres on linking HSBC Orion, the bank’s digital asset platform, with LSEG’s Digital Securities Depository. Finextra said the memorandum of understanding is intended to support the UK government’s aim of improving interoperability in the pilot programme.

In practical terms, the link would allow investors to access and hold the Digital Gilt Instrument, known as Digit, through either HSBC’s platform or LSEG’s depository infrastructure. That model is designed to reduce separation between digital market platforms, a common concern for tokenised securities projects where assets, investor records and settlement processes can otherwise sit in closed systems.

HSBC was selected in February through a public tender to provide a blockchain platform for the digital gilts pilot, Finextra reported at the time. The new agreement brings LSEG into the operating model as an additional investor depository, broadening the infrastructure available for the programme.

A gilt is a UK government bond. Digit is HM Treasury’s pilot instrument for issuing a government bond in digital form, with the programme positioned as a test of how distributed ledger and digital asset infrastructure can support primary issuance, holding and settlement in public debt markets.

Julia Hoggett, chief executive of London Stock Exchange plc and head of digital and securities markets at LSEG, said the collaboration would provide “additional settlement optionality for the market” and support the Digit pilot as an extra investor digital securities depository. She said LSEG looked forward to helping HM Treasury deliver what she described as the UK’s first digital government bond issuance.

For market participants, the operational point is the depository link rather than a change in the economic nature of the bond. A bilateral connection between depositories can allow investors and intermediaries using different platforms to interact with the same instrument, subject to the rules and technical design of the pilot.

Finextra reported that the integration is expected to reduce fragmentation between digital platforms and encourage wider participation in the pilot. The report did not provide an issuance size for Digit or further details on transaction timing beyond the expected first use of HSBC Orion by the first quarter of 2027.

This story draws on original reporting from Finextra Research.