The Bank of England and the FCA have launched a digital securities sandbox for DLT testing

Bank of England (BoE) and Financial Conduct Authority (FCA) participants have launched a consultation on draft guidelines for the Digital Securities Sandbox (DSS), designed to test distributed ledger technology (DLT) for trading and settlement. Digital securities such as stocks and bonds.

According to the joint consultation and draft guidelines released on Wednesday, the sandbox will last for five years and could introduce a new regulatory framework for securities settlement.

Successful applicants to use the sandbox will be able to provide warehousing and settlement services, as well as conduct trading space under the revised regulations.

The Bank of England and the UK financial regulator, the Financial Conduct Authority, aim to have the first group of applicants join the Digital Securities Sandbox in autumn 2024. FCA chief executive Sheldon Mills said in a statement:

“The new Digital Securities Sandbox will change how we regulate by allowing companies to test regulatory changes before these changes become permanent. We hope this will be a more effective, collaborative and faster way to deliver regulatory change.”

The proposed five-year entry restrictions could pave the way for permanent regulations governing the trading and settlement of digital assets.

The UK Treasury originally launched a consultation on DSS in July 2023. Subsequently, the United Kingdom government He said he would introduce legislation to implement the initiative in November 2023.

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Following this, the government introduced new regulations in December 2023, giving the country's financial regulators guidelines to regulate sandboxing. These rules became part of the UK Financial Services and Markets Act 2023 on 8 January.

After releasing the joint consultation paper today, interested parties have until May 29 to comment. The BOE and FCA will then review the feedback, with plans to open applications for DSS in winter 2024. Regulators expect the first DSS applicants to join the initiative. In the autumn.

According to the regulators, DSS welcomes a range of organizations with the aim of facilitating learning opportunities and fostering innovation within the UK financial system.

This comprehensive approach enables faster and more cost-effective methods for trading, settlement and use of securities among financial market participants.

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