Economic Secretary to the Treasury’s Keynote Address at UK Digital Assets Week 2023

Good morning everyone, and thank you for being here today.

It is truly a pleasure to inaugurate UK Digital Assets Week. Just a stone’s throw away lies the Crown Jewels, representing some of the nation’s most valuable possessions, safeguarded by centuries of law, institutions, and formidable security measures. In contrast, we gather here to deliberate on a different kind of asset—digital assets—that are poised to play a critical role in shaping our country’s future and enhancing our prosperity.

Today, we are not questioning whether digital technologies will transform financial services; they already have. Instead, the pivotal question is whether the UK is prepared to act swiftly and ambitiously enough to influence this change.

My message is clear: we are ready, we are moving with urgency, and we are more than equipped to lead the world in digital assets.

The Evolution of Financial Infrastructure

Reflecting on the last couple of centuries, we can observe that technological advancements have consistently brought forth new products and services. However, there are moments when technology precipitates more fundamental shifts, altering the very infrastructure upon which economies function.

The transition from paper to electronic trading in the 1980s and 1990s revolutionised our financial markets. I firmly believe that the evolution from electronic markets to genuinely digital markets will be equally transformative.

This evolution transcends merely eliminating paper or upgrading existing processes to slightly more efficient computer systems. It prompts us to consider whether the underlying architecture of finance can be improved. Can assets transfer more efficiently? Can transactions settle more swiftly? Can collateral be optimised? Can new forms of currency enhance payment systems? And can technology broaden market access, fostering increased competition and innovation?

Thus, digitalisation is not merely a niche technological agenda; it is an economic agenda, a competitiveness agenda, and increasingly, a national imperative.

Collaboration for Success

The government can establish conducive conditions, while regulators can offer clarity, confidence, and necessary protections. However, it is the firms, investors, and entrepreneurs who will deploy the capital, create products, and compete in the future markets. This collaborative effort will form the bedrock of the UK’s success.

As we advance this partnership, we must also engage closely with international allies to unlock the benefits of digital assets and prevent fragmented markets. This awareness is particularly salient as we prepare for our G20 Presidency in 2027.

Of course, expressing our desire for success is the easier part. The real challenge lies in our actions. This is where the UK narrative becomes most compelling.

Last year, we unveiled our Wholesale Financial Markets Digital Strategy, centred on market optimisation, transformation, and leadership. We are dismantling outdated processes, creating a regulatory environment conducive to new infrastructure, and establishing a regulatory framework for cryptoassets and stablecoins. Furthermore, we are digitising our own sovereign issuance.

Industry is fundamentally paving the way forward. To this end, I appointed Chris Woolard as our Wholesale Digital Markets Champion. His initial report in July articulated a clear challenge: tokenised markets are essential to the future of financial services, and the decisions we make now will significantly influence the UK’s position in the next generation of global markets.

Progress in Digital Securities

Since that pivotal report, Chris has announced the formation of industry action groups, uniting firms from across the sector to address the practical challenges hindering adoption. It is encouraging to witness the diversity of firms and the calibre of professionals involved. I would like to express my gratitude to everyone participating in this initiative for dedicating your time and enthusiasm to the project.

This commitment is crucial. The current challenge is not about demonstrating that the technology functions; it is about creating the conditions for markets to adopt it at scale. The potential rewards are significant, and we stand at a moment when the UK has the chance to unite, exhibit boldness, and position itself at the forefront of the next generation of global financial markets.

We can observe a growing momentum across the financial ecosystem. Take the Digital Securities Sandbox, for example. This initiative was developed to provide firms with a pathway from testing new technologies to their application in live UK financial markets, and that journey is now underway.

In July, HSBC became the first institution to receive approval to operate a live Digital Securities Depository within the Sandbox, followed by ClearToken as the second approved firm. This is tangible progress.

Introducing the Digital Gilt Instrument

To ensure the Sandbox continues to support firms effectively, we plan to introduce secondary legislation in the coming months to facilitate the delivery of digital services and issuances in the Digital Securities Sandbox.

We are transitioning from experimentation to live operations, with digital financial-market infrastructure trading digital securities here in the UK. The Digital Gilt Instrument (DIGIT) embodies the government’s commitment to this agenda and its readiness to take an active role in the digitalisation process.

The DIGIT will be a digitally native UK Government debt issuance, launched on the HSBC Orion platform within the Digital Securities Sandbox. We anticipate the pilot issuance in the first quarter of 2027, and we are making preparations for potential further issuances, contingent on the success of the initial transaction.

To support the government’s objectives, HSBC and LSEG are collaborating to create a pioneering bilateral link, allowing investors to access DIGIT through either infrastructure. Our intention is to list DIGIT as the first digital asset on the LSEG main market, and we are engaging with the broader sector to ensure the pilot’s success.

I am delighted to announce the appointment of six firms as Joint Lead Managers for the pilot issuance of DIGIT. This is a significant milestone for the project and another substantial step towards fulfilling our ambitions for digital assets in the UK.

Building a Diverse Digital Market

These institutions bring a wealth of experience from both traditional sovereign debt issuances and digital markets, and their involvement reinforces our commitment to ensuring DIGIT’s success. The strength of the United Kingdom lies in being one of the world’s premier meeting points for international capital, and we aspire for the same to be true for digital capital markets. One of DIGIT’s objectives is to act as a catalyst for the development of Distributed Ledger Technology (DLT), creating an ecosystem that positions the UK at the centre of global connectivity.

However, digital securities represent only one aspect of this transformation. To establish genuinely digital markets, we must also contemplate the role of digital money. It is counterproductive to modernise one half of a transaction while the other remains reliant on outdated technology.

Our approach does not involve selecting which form of digital money will ultimately prevail. Rather, our role is to cultivate an environment where responsible innovation can thrive, encompassing stablecoins, tokenised commercial bank deposits, and a diverse system where various forms of currency can coexist and be freely exchanged.

Regulatory Developments in Cryptoassets

In recent months, we have made significant strides in implementing our regulatory framework for cryptoassets. This year marked a pivotal shift in the UK’s stance toward cryptoassets, moving from discussions about regulatory shape to actual implementation. The regulations I introduced in February will bring a wide array of cryptoasset activities under the FCA’s regulatory umbrella from 25 October 2027.

In June, the FCA published an extensive package of final rules and guidance pertaining to stablecoin issuance, regulated cryptoasset activities, and prudential requirements. Just last month, the FCA released its final perimeter guidance to assist firms in understanding where authorisation will be necessary, with the application window having opened last week (30 September) for firms wishing to utilise the transitional arrangements.

This represents a significant advancement. We want businesses to build, invest, hire, and launch products here. Being a leading digital assets hub requires not only ambition but also robust standards. The two are intrinsically linked. Trust is an asset, as are clear regulations, and a jurisdiction where consumers, investors, and counterparties are aware of their rights carries a considerable competitive advantage.

The Importance of Stablecoins

Our approach to stablecoins embodies this philosophy. Stablecoins possess the potential to drive growth and enhance the efficiency of financial markets, enabling quicker, lower-cost transactions, more efficient settlements, and new forms of innovation, including programmable payments. However, this potential can only be realised through appropriate regulation and genuine stability.

To that end, we have established a clear regulatory framework for stablecoins in the UK. Through the cryptoassets regulatory regime, we have created a regulated activity for issuing stablecoins, providing firms with the certainty needed to invest, innovate, and expand.

We continue to refine this framework, having laid legislation in September to introduce targeted amendments to the cryptoassets regulations after extensive engagement with the industry. These changes aim to offer greater certainty for firms providing stablecoin payment services and to eliminate obstacles to essential use cases.

As many of you may be aware, we are also consulting on reforms to the payments regulatory framework, including proposals to incorporate UK-issued stablecoins within the payments services perimeter. The amendments to the cryptoassets regime will ensure that firms are not required to secure cryptoasset permissions now, only to seek reauthorisation following the anticipated payments reforms. Together, these elements form the foundation for a credible and competitive UK stablecoin market.

International Cooperation and the Bigger Picture

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