UK launches sandbox to test trading in tokenized securities

What’s new? The Bank of England (BoE) and the Financial Conduct Authority (FCA) have launched a consultation on draft guidance for its Digital Securities Sandbox (DSS). It aims to allow participants to test blockchain technology for trading and settlement of digital securities such as stocks and bonds. The DSS will run for five years and could create a new regulatory regime for securities settlement.

Press release on the BoE website

What else is known? Sandbox participants will be able to provide custody and settlement services and operate trading platforms under the amended rules.

The BoE and FCA plan for the first group of applicants to join the DSS by the 2024 fall. FCA Executive Director Sheldon Mills said the digital securities sandbox will allow firms to test the regulatory amendments using real-world situations before the measures become permanent.

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Following the release of the consultation document, stakeholders can leave feedback until May 29. The BoE and FCA will consider the feedback and open the call for applications by the summer, with the first applicants joining the initiative by the fall.

It is envisaged that a wide variety of firms will participate in the DSS, this will optimize learning opportunities and stimulate innovation in the UK financial system. This inclusive approach can promote faster and more cost-effective methods of trading, settlement, and use of securities among financial market participants.

Earlier, it became known that the UK will adopt a law on stablecoins and staking in the next six months. According to industry experts, fiat stablecoins and their issuers will be regulated under the existing laws on payments, and staking will be separated into a separate type of activity, unrelated to the concept of collective investment.

Last year, the financial FCA approved only 4 out of 28 license applications from crypto companies. According to experts, this threatens Prime Minister Rishi Sunak’s previously announced plan to turn the country into a crypto hub.