The UK is considering expanding its Treasury bill issuance program, a move that could help develop the sterling money market and meet potential demand from new buyers such as stablecoin issuers.

The UK Debt Management Office (DMO) will launch consultations in January on "expanding and deepening" the ultra-short-term debt market. Governments in other countries, including the US, have increasingly relied on Treasury bills to meet financing needs.

"The government wants to hear market participants' views on the potential expansion and deepening of the UK Treasury bill market," DMO CEO Jessica Pulay said in an interview on Wednesday. "It's important to emphasize that no decisions have been made regarding future financing."

This follows a Bank of England report earlier this month, which noted that the current UK Treasury bill market may not meet the needs of stablecoin issuers, who are expected to hold such securities to back their liabilities. The DMO did not comment on the Bank of England's remarks or stablecoin plans.

Under a Bank of England proposal currently under consultation, systemic stablecoin issuers could allocate up to 60% of their reserve assets to short-term UK government bonds denominated in sterling.

"The current size, structure, and usage" of the UK short-term debt market may be "insufficient to support the significant demand and related activities of systemic stablecoin issuers," the Bank of England wrote in its November 10 document. "Secondary market trading of UK Treasury bills and short-term gilts is currently thin, as these securities are typically held long-term for liquidity management purposes."

The UK government typically issues one-month, three-month, and six-month Treasury bills weekly. In October, outstanding Treasury bills totaled approximately £108 billion (around $143 billion).

To adapt to changing investor structures, the DMO has generally shortened the maturity of its bond issuances. With declining demand from defined-benefit pension funds, the DMO has reduced long-term gilt issuance to record lows.