The UK Treasury is racing to solve a critical payments gap before it can launch its first tokenized sovereign bond by Q1 2027, while Bitcoin confronts a governance battle that could culminate in a chain split as early as August 7, 2026.
UK’s DIGIT pilot hits on‑chain cash wall
The Digital Gilt Instrument (DIGIT), scheduled to settle on HSBC’s Orion platform by the end of March 2027, remains hamstrung by the absence of a regulated, on‑chain sterling settlement mechanism. The Treasury first announced the project in 2024 and selected HSBC in February 2026; the bank received Gate 2 sandbox approval on July 13, but the pilot still lacks a way to move the cash leg of the transaction on the same digital network as the bond. “Without a dependable cash asset, institutions may still need to move money through conventional banking systems, reducing the settlement benefits,” industry participants told CoinDesk.
The Bank of England and the Financial Conduct Authority have acknowledged the problem and are exploring stablecoins, tokenized deposits, and a central bank synchronization service. However, that service is not expected until 2028, leaving DIGIT potentially dependent on private settlement assets. Chancellor Rachel Reeves has already instructed the Treasury to prepare for additional issuances if the first transaction succeeds, while the Bank of England aims to make the digital gilt eligible as collateral in its 2027 system upgrade.
Bitcoin’s BIP‑110 showdown
On Bitcoin, a soft fork proposal dubbed BIP‑110 is setting up a constitutional clash. Introduced in December 2025 by Dathon Ohm, the “Reduced Data Temporary Softfork” would cap OP_RETURN outputs at 83 bytes and limit various data‑carrying techniques for one year, targeting Ordinals and non‑monetary data that have consumed block space since 2022. Supporters argue it returns Bitcoin to its payment and settlement roots; critics call it a governance landmine.
The proposal uses miner signaling with a 55% threshold, but to date has garnered less than 1% of hashrate. If the soft threshold fails, a mandatory signaling period begins at block 961,632 – August 7 – forcing nodes running BIP‑110 software (primarily Bitcoin Knots) to reject non‑signaling blocks, effectively splitting the chain. Michael Saylor, Adam Back, and Jameson Lopp have all voiced sharp opposition, warning that a minority‑activated soft fork sets a dangerous precedent and could fracture consensus. Meanwhile, Paul Sztorc plans an unrelated hard fork at block 964,000 for his Drivechain‑focused eCash, adding a 1:1 airdrop and further operational complexity in the same time window.
Bitcoin currently trades around $64,300, down 49% from its October 2025 all‑time high. Polymarket prices suggest the market assigns a low probability to a disorderly split, but chain splits carry replay risks, custody confusion, and liquidity fragmentation. August 7 will test whether Bitcoin’s governance has evolved since the blocksize wars.
