New UK sandbox will 'modify regulation' for digital asset trading

The Bank of England (the Bank) and the Financial Conduct Authority (FCA) have issued a joint consultation and draft guidance on their new Digital Securities Sandbox (DSS).

The UK financial watchdogs said that the five-year-long sandbox will modify regulation to allow firms to use new technology, including distributed ledge technology (DTL), in the trading and settlement of digital shares and bonds.

Under the modified regulation, successful applicants for the scheme will have permission to carry out securities depository and settlement services whilst operating a trading venue.

This means that for the first time UK firms, including new financial markets infrastructure providers, will be able to provide these services from a single legal entity.

Sheldon Mills, executive director, consumers and competition at the FCA said that the DDS will reshape how the organisation regulates by allowing firms to test regulatory changes using "real world situations" before these changes are made permanent.

The Bank said that the sandbox could lead to a new permenant regulatory regime for securities settlement under which firms could operate in future, adding that the government has the tools to make these changes "reasonably quickly".

“The Digital Securities Sandbox is an important tool for regulators to learn how we need to react to benefit safely from developments in technology and changes to vital financial market processes such as securities settlement," said Sasha Mills, executive director for financial market infrastructure at the Bank.

Alongside the consultation paper, the regulators published draft guidance for firms, including details of how the Bank plans to allow firms to scale their activities once authorised to undertake live activity.

Feedback on the consultation will be open until 29 May 2024.



Share Story:

Recent Stories


Sanctions evasion in an era of conflict: Optimising KYC and monitoring to tackle crime
The ongoing war in Ukraine and resulting sanctions on Russia, and the continuing geopolitical tensions have resulted in an unprecedented increase in parties added to sanctions lists.

Achieving operational resilience in the financial sector: Navigating DORA with confidence
Operational resilience has become crucial for financial institutions navigating today's digital landscape riddled with cyber risks and challenges. The EU's Digital Operational Resilience Act (DORA) provides a harmonised framework to address these complexities, but there are key factors that financial institutions must ensure they consider.

Legacy isn’t the enemy: what FSIs can do to keep their systems up and running
In this webinar we will examine some of the steps FSIs have already taken to rigorously monitor and test systems – both manually and with AI-powered automation – while satisfying the concerns of regulators and customers.

Optimising digital banking: Unifying communications for seamless CX
In the digital age, financial institutions risk falling behind their rivals if they fail to unite fragmented communications ecosystems to deliver seamless, personalised customer experiences.

This FStech webinar sponsored by Precisely explores vital strategies to optimise cross-channel messaging through omnichannel orchestration and real-time customer data access.