According to CoinDesk, the Bank of England (BoE) and the Financial Conduct Authority (FCA) are seeking feedback on their draft guidance for a proposed digital securities sandbox. This sandbox will allow participants to test products and services based on distributed ledger technology (DLT). The sandbox, a controlled environment for firms to test their products, is expected to last five years and could potentially lead to a new regulatory regime for securities settlement.
The BoE and FCA initiated a consultation on the draft guidance for their digital securities sandbox, which is designed to facilitate the testing of DLT in financial services. Sasha Mills, the BOE's executive director for financial market infrastructure, stated that the Digital Securities Sandbox is a crucial tool for regulators to understand how to safely benefit from technological advancements and changes to essential financial market processes such as securities settlement.
Successful applicants will be permitted to provide securities depository and settlement services and operate a trading venue under modified regulations. Participants will have the opportunity to use DLT in the trading and settlement of digital securities such as shares and bonds. The U.K. has recently made strides towards becoming a crypto hub, including the introduction of legislation to treat crypto as a regulated financial activity. The U.K. passed legislation in December allowing the FCA and the BOE to operate the sandbox.
The consultation, which will run until May 29, follows a previous feedback period last year. The regulators intend to issue the final guidance and begin processing applications towards the end of the second quarter.