BofE and FCA publish draft guidance on Digital Securities Sandbox

The DSS will change regulations in the UK to enable financial market participants to use new technologies – such as distributed ledger technology – when trading and settling digital securities such as stocks and bonds.

Successful applicants to the DSS will be able to provide securities custody and settlement services and operate a trading venue under these amended regulations. For the first time, they can offer these services from a single legal entity.

The government has already received 19 expressions of interest from established financial market infrastructures, banks and new entrants to take part in the first five-year tests of the sandbox.

Now the Bank of England and the FCA have published draft guidance for these firms, including details of how the bank proposes to enable them to scale their activities once they are approved to run live activities.

Interested parties now have the opportunity to provide feedback on how the sandbox works in practice.

Sasha Mills, managing director of financial markets infrastructure at BofE, says: “The Digital Securities Sandbox is an important tool for regulators to learn how we need to respond to safely benefit from technological developments and changes to key financial market processes such as securities settlement.”

Sheldon Mills, managing director of consumer and competition at the FCA, added: “The new Digital Securities Sandbox changes the way we regulate by allowing businesses to test regulatory changes against real-world situations before those changes become permanent. “We hope this will be a more effective, collaborative and faster way to achieve regulatory change.”