UK efforts to issue digital gilts and tokenized bonds are hitting a structural bottleneck: there is no widely available onchain cash instrument to settle the cash leg of transactions, forcing market participants to revert to legacy payment rails and undermining the efficiency gains of tokenization. The issue has been raised by multiple issuers and infrastructure providers engaging with the FCA and Bank of England's digital securities sandbox.
Armada's crypto desk faces an analogous problem when tokenized T-Bills are used as collateral, since cash margin calls and settlement may still depend on traditional payment systems, creating timing mismatches. This UK experience is instructive for Armada's collateral policy design and for conversations with Fireblocks and counterparties about whether stablecoin or CBDC settlement options need to be explicitly addressed in repo documentation.