The Bank of England (BoE) and the Financial Conduct Authority (FCA) of the United Kingdom have initiated a consultation on the preliminary guidelines for their Digital Securities Sandbox (DSS). This sandbox is specifically designed to enable participants to test the use of distributed ledger technology (DLT) for the trading and settlement of digital securities like shares and bonds.
As per the joint consultation and draft guidance released on April 3, the sandbox will be in operation for a period of five years and may potentially lead to the establishment of a new regulatory framework for securities settlement. Successful applicants who participate in the sandbox will have the opportunity to offer securities depository and settlement services, as well as operate a trading platform under modified regulations.
The aim of the BoE and the FCA is for the first group of applicants to join the DSS by the autumn of 2024. Sheldon Mills, Executive Director of the FCA, stated that this initiative, spanning five years, could lay the foundation for permanent regulations governing the trading and settlement of digital assets in the future.
The UK Treasury initially began consultations on the DSS in July 2023. Subsequently, the UK government announced its intention to pass legislation implementing this initiative by November 2023.
In December 2023, the government introduced new regulations that provided guidelines to the country’s financial regulators on overseeing the sandbox. These regulations came into effect on January 8, 2024, as part of the UK’s Financial Services and Markets Act 2023.
After the release of the joint consultation paper, interested parties now have the opportunity to provide feedback until May 29. Following this, the BOE and FCA will review the feedback and begin accepting applications in the summer, with the first set of applicants joining the initiative by the autumn.
According to the regulators, the DSS will welcome a diverse range of firms, with the goal of maximizing learning opportunities and promoting innovation within the UK financial system. This inclusive approach could facilitate faster and more cost-effective methods for trading, settling, and utilizing securities among participants in the financial market.
Magazine:
How the digital yuan could change the world… for better or worse