Promote the development of digital securities and explore distributed ledger technology

"Crypto City" reported in January this year that the Bank of England (BoE) and the British Financial Conduct Authority (FCA) were introducing an experimental platform called Digital Securities Sandbox (DSS), which was launched on September 30 Officially announced today, it allows companies to explore the application of distributed ledger technology (DLT) in financial securities. The move aims to facilitate the issuance, trading and settlement of digital securities in the UK, bringing efficiency, transparency and resilience to the market.

The FCA believes that emerging technologies have the potential to bring changes to the market and, when successfully implemented, will make processes faster and cheaper, saving costs for the market and its users. Through DSS, companies can explore the potential benefits of digital securities by leveraging programmable and distributed ledger technology while complying with BoE and FCA regulations.

Strengthening the UK’s financial position and protecting market integrity

This plan aims to strengthen the UK's position as a global financial center and create favorable conditions for investment and sustainable growth. The DSS will run until December 2028 and may be extended. The window to apply to participate will close in March 2027, giving regulators and companies time to transition to a more permanent regime.

DSS will be divided into four phases: testing, launch, expanded functionality and permanent system. In the second phase, DSS will involve the issuance, trading and settlement of actual digital securities that function similarly to traditional securities and can be used in repurchase agreements and derivative financial instruments contracts. According to the BoE, this could include stocks, corporate and government bonds, money market instruments, fund units and emissions licenses.

Source: FCA DSS will be carried out in four phases

The FCA said the DSS is open to all businesses legally registered in the UK, regardless of size and stage of development, including authorized financial institutions and new entrants to the market. This will promote innovation while ensuring "financial stability" and "market integrity", contributing to the establishment of a safe, sustainable and efficient financial system.

Promote financial innovation and achieve sustainable growth

The Bank of England emphasized that it will pursue three major goals together with the FCA: promoting a safe, efficient and sustainable financial system, protecting financial stability, and ensuring market integrity. The FCA also issued policy statement PS24/12 on the occasion of the launch of the DSS, outlining the final policy approach and responding to industry feedback.

Source: FCA FCA releases policy statement PS24/12

The launch of the DSS represents an important step in the UK’s exploration of the application of blockchain and other emerging technologies in financial markets. By introducing DLT and tokenized securities into traditional financial markets, the UK hopes to maintain its leading position in the global financial innovation industry. However, it should be noted that the UK’s focus on DLT does not necessarily indicate its intention to promote the “decentralization” concept advocated by Web3.

Further reading
UK proposes new bill! Cryptocurrency will be regarded as "personal property", can it effectively prevent fraud?
UK regulations are getting tougher! 450 crypto companies have been warned: 87% are not eligible