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The Sandbox: Building a Tech Friendly Regime for a Growing Crypto Industry

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On April 3rd, the Bank of England and FCA jointly published a consultation which marked the next step in opening a Digital Securities Sandbox (DSS) in the UK. The DSS is key to supporting responsible innovation in the UK. It allows market participants to try out new business models that are not yet permitted under current regulations, while simultaneously enabling regulators to identify where legislation and policies may need to change. 
On April 3rd, the Bank of England and FCA jointly published a consultation which marked the next step in opening a Digital Securities Sandbox (DSS) in the UK. The DSS is key to supporting responsible innovation in the UK. It allows market participants to try out new business models that are not yet permitted under current regulations, while simultaneously enabling regulators to identify where legislation and policies may need to change. 

Elise Soucie‘s monthly column will cover policy and consultation updates from around the world, as well as the latest digital innovations in institutional markets.

On April 3rd, the Bank of England and FCA jointly published a consultation which marked the next step in opening a Digital Securities Sandbox (DSS) in the UK. The DSS is key to supporting responsible innovation in the UK. It allows market participants to try out new business models that are not yet permitted under current regulations, while simultaneously enabling regulators to identify where legislation and policies may need to change. 

Prospective financial market infrastructures (FMIs) can launch new types of trading venues and/or settlement services using DLT, or other technologies. They will then have the chance to issue and trade a wide range of financial instruments in the DSS including equities, corporate and government bonds, money market instruments, units in collective investment undertakings, and emissions allowances.

Yet the Sandbox isn’t just a place to play at being an FMI with new technologies. Throughout the DSS process the authorities will work with firms to create a glidepath from one stage of the Sandbox to the next. 

Successful participants will be able to exit the Sandbox into the market if they can demonstrate sustainable business models and appropriate risk management. Furthermore, authorities have already been granted the necessary powers to change regulation as appropriate to support innovative new business models. 

The current consultation, open for comment until May 29th, is an opportunity for market participants to discuss the operational requirements of the DSS and provide feedback to authorities before they begin their projects. That feedback will make the Sandbox a better place to grow and explore for the nascent Crypto industry and will be critical to its success.  

Want to share your opinion with the Bank of England and FCA before the Sandbox goes live? The full consultation paper can be found here and the regulators invite industry to provide feedback on the proposals and to flag any relevant issues that may not be addressed in the consultation. Any comments or enquiries can be sent to [email protected] or [email protected]. If it is your first time responding to a consultation and you want to discuss the feedback process before submitting, feel free to reach out to Elise Soucie, Global Director of Policy & Regulation at Global Digital Finance ([email protected]).