Bank of England and FCA Begin Consultation for Digital Securities Sandbox

The Bank of England (BoE) and the Financial Conduct Authority (FCA) are consulting their proposed guidance for the Digital Securities Sandbox (DSS).

The DSS is a regime that intends to adjust UK regulations to allow financial market participants to employ emerging technologies, like Distributed Ledger Technology (DLT), to trade and settle digital securities, including shares and bonds.

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Those who get the green light to join the DSS will have the capability to offer both securities depository and settlement services and to run a trading platform within this new regulatory framework. The sandbox is set to run for five years.

Sheldon Mills, the Executive Director of the FCA, emphasized the innovative nature of the DSS:

The new Digital Securities Sandbox reshapes how we regulate by allowing firms to test regulatory changes using real world situations before these changes are made permanent. We hope this will be a more effective, collaborative and quicker way of delivering regulatory change.

The selection process for the inaugural group of sandbox participants will start in Summer 2024 after a thorough review of feedback from the ongoing consultation period ending May 29.

The UK Treasury has also previously consulted the digital security sandbox proposals in July 2023.

This initiative represents a stride towards integrating blockchain technology into the mainstream financial sector. By offering a regulated testing ground, the BoE and the FCA promote innovation and potentially transform the way securities are traded and settled.