Modernising capital markets
Tokenovate is pleased to have submitted its formal response to the UK Government’s Digital Gilt Instrument (DIGIT) Pilot. This timely and important project aims to enable the Government to explore how distributed ledger technology (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.
Tokenovate’s submission outlines how and why the FINOS Common Domain Model (CDM), backed by industry-associations ISDA, ISLA and ICMA, has a key role to play in enabling the issuance and future liquidity of DIGIT, and a path to show how the required interoperability with existing infrastructure can be delivered efficiently using enterprise grade access to a public blockchain.
The response emphasises:
- Use of the CDM as a common industry standard that can embed these standards in DIGIT at issuance, thus unlocking a consistent representation of a digital gilt with a traditional gilt, and, critically, the market infrastructure to identify eligible assets for collateral.
- Strong secondary liquidity will be driven by issuance at the optimal tenor and issuance size alongside a digital asset that is box ready to be interoperable in repo trades as collateral.
- How the DIGIT issuance could be delivered quickly and efficiently using new UK businesses free of tired legacy technology.
- The importance of real-world testing to align parties and unlock the full potential of tokenised assets.
The submission further details how DIGIT can improve efficiency and reduce settlement risk through automation and T0 atomic settlement and, additionally, fostering wider adoption of public blockchain technology within financial markets.
Interoperability and clear legal frameworks
Our submission emphasises the necessity for interoperability, maturity alignment, and appropriate issuance sizes to maximise market engagement and liquidity. Additionally, we have highlighted the importance of clear legal frameworks, rigorous cybersecurity measures, and robust governance protocols to ensure investor confidence and compliance with regulatory requirements.
Tokenovate is participating in this initiative to support and drive the modernisation of capital markets, particularly the post-trade process.
We look forward to the opportunity to participate in the DIGIT process.
Source: The HMT and DMO request for information can be found here.
