DSS will enable companies to establish financial market infrastructure leveraging digital asset technology.
The United Kingdom is set to establish a new Digital Securities Sandbox (DSS) next year to foster innovation in the digital securities sector. The move marks the second crypto-related sandbox initiative in the UK as it continues to solidify its stance in the evolving world of finance and blockchain technology.
For clarity, a sandbox is a controlled testing environment for individuals seeking to introduce innovative products to the market.
UK to Introduce Digital Security Sandbox Next Year
Earlier this year, the FCA launched its regulatory sandbox in August, allowing companies with promising products to present them to a select group of early customers for testing.
A few months after the launch, British authorities plan to introduce a second sandbox, primarily focusing on digital security.
Helen Boyd, the head of capital markets at the Financial Conduct Authority (FCA), disclosed this development during her speech at CCData’s Digital Asset Summit on Tuesday.
She revealed that His Majesty’s Treasury plans to introduce a second sandbox, which will follow a new set of rules to facilitate further developments with digital securities by the end of the first quarter of 2024.
“It’s a completely new way of us making regulations. In the past, we’ve tended to wait for activity to come along and regulate it. This is a much more iterative process, and we expect it to be a learning curve,” she said.
Temporarily Modified Legislation
She also explained that the forthcoming DSS will differentiate itself from the existing Digital Sandbox. While the FCA’s Digital Sandbox primarily supports tech firms in their early-stage product development, the DSS will introduce a novel set of regulations tailored primarily for digital securities.
According to Boyd, DSS will enable companies to establish financial market infrastructure leveraging digital asset technology. These infrastructures will operate under a temporarily modified legislative and regulatory framework, allowing them to engage in various activities related to digital securities.
“To set up financial market infrastructures that utilize digital asset technology, which can perform a number of activities in relation to digital securities under a temporarily modified legislative and regulatory framework.”
UK Treasury Assessing Power Delegation to FCA
Boyd also shed light on the FCA’s role as the principal regulator for cryptocurrencies in the UK. She explained that the FCA’s authority in this domain hinges on decisions made by the HM Treasury, which is currently evaluating the extent of power to be delegated to the FCA.
“At the moment, we are still waiting for that power. We do have to wait for the Treasury to firstly publish the results of its consultation and then move forward with the legislative part,” said she.
In recent times, British regulators have displayed a rigorous approach to the digital asset industry. The HM Treasury is contemplating a comprehensive ban on crypto investment cold calls. At the same time, the FCA has issued stern warnings to local crypto businesses that fail to adhere to its marketing regulations.