The U.K. has opened its testing environment — the Digital Securities Sandbox (DSS) — to applications from financial firms looking to bring tech-based innovations to securities markets.
Earlier this year, the U.K.’s Financial Conduct Authority (FCA) and the Bank of England (BoE) — which will jointly operate the sandbox — carried out a consultation on a proposed sandbox that will allow firms to try out the application of new technologies in traditional financial markets.
The sandbox is intended to allow firms to test technological innovations, such as trading digital versions of traditional securities — including bonds, equities, investment funds, and money market instruments. It’s not aimed at testing trading and settlement for novel assets, such as cryptoassets, the FCA and BoE said in a release.
“The aim of the DSS is that these securities should be capable of being used in broadly the same way as traditional securities,” the regulators said. “For example, firms should be able to use the securities issued in repurchase agreements or write derivative contracts based on securities in the DSS as they normally would any other security.”
The regulators said the sandbox “reshapes how we regulate by allowing firms to test legislative changes in real world scenarios before the changes are implemented.”
“We believe the DSS could also lead to a quicker, more effective and collaborative way of delivering regulatory change,” they added.
The testing environment is currently expected to be operational until December 2028.
“The window for applying to join the DSS is expected to close around March 2027, so that the regulators and firms inside the DSS can prepare for a transition to a possible new permanent regime, provided the new technologies are implemented successfully,” the regulators noted.