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The Bank of England is teaming up with the UK Financial Conduct Authority (FCA) for a consultation on the draft guidance for a Digital Securities Sandbox.

The Sandbox will be used to test the use of distributed ledger technology (DLT) in trading and settling digital securities including bonds and shares.

According to the draft guidance provided by the BoE and the FCA, this Sandbox will last for five years. It could also pave the way for a new regulatory framework for securities settlement.

Those who successfully apply for this sandbox, which will last for five years, will manage to offer a wide range of services including securities depository and settlement. They will also manage to run a trading venue while being governed by a modified set of regulations.

Bank of England and #FCA launch digital securities #sandbox for #DLT testing :
The Bank of England and the U.K.’s financial regulator, the Financial Conduct Authority, aim for the inaugural group of applicants to join the Digital Securities Sandbox in autumn 2024.
According to a… pic.twitter.com/Xkrn49x4Bo

The draft guidance also plans for the first batch of applicants to the sandbox join before the end of the year. These applicants will have a chance to offer DLT services in real-world situations under a new regulatory framework. The bodies plan that the sandbox will pave the way for more permanent changes to be adopted.

“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,” said the FCA Executive Director, Sheldon Mills.

This Digital Securities Sandbox will pave the way for creating permanent regulations that will govern the trading and settlement process for digital assets.

The UK has been working towards creating a new crypto regulatory regime. Last month, the UK Treasury published a consultation paper seeking feedback on how to ensure non-fungible tokens (NFTs) comply with anti-money laundering and counter-terrorism financing laws.

The UK Treasury started the consultation process for this framework mid-last year. At the time, the UK government said it would set up legislation to implement this digital sandbox by November last year.

This sandbox will be governed by a set of new regulations that the UK government came up with in December 2023. These regulations allowed those regulating the financial markets to oversee this digital sandbox. This new regulatory framework came into effect on January 8.

The interested parties will be required to provide feedback on this digital sandbox until May 29. The BoE and the FCA will review the feedback provided as a result of this process before opening applications during the summer. The first applicants to this initiative will start joining by autumn. 

This digital sandbox will be open to a variety of firms. The BoE and the FCA aim for this Sandbox to present a learning opportunity while also bolstering innovation in the UK financial industry.

The DSS is also adopting an inclusive approach. It wants to come up with a fast and cost-effective method that will support processes like settlement, trading, and securities utilization in the financial market.

The post Bank of England partners with FCA for a Sandbox to test Digital Ledger Technology appeared first on Invezz

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