The British Treasury is hoping to launch a Digital Securities Sandbox (DSS) by the end of Q1 next year, according to Helen Boyd, Head of Capital Markets at the independent regulatory watchdog the Financial Conduct Authority (FCA).
A sandbox is a controlled test environment for those looking to bring innovative products to the market. The FCA already has a similar engagement via its Regulatory Sandbox where companies with viable products can begin pitching them to a closed circle of early customers.
Speaking at CCData’s Digital Asset Summit in London today, Boyd drew a distinction between the FCA’s “traditional innovate sandbox” and the upcoming DSS, which she says has “a new rule set that would allow it to do new things with digital securities.”
“It's a completely new way of us making regulation. In the past, we've tended to wait for activity to come along and regulate it. This is a much more iterative process, we expect it to be a learning curve” she said, adding the DSS will 'hopefully' launch “at the end of Q1 next year.”
When asked by the host to explain to the audience what the role of the FCA will be in regulating crypto, Boyd explained that the FCA gets its powers from HM Treasury–the UK’s Finance Ministry.
“At the moment, we are still waiting for that power,” Boyd clarified. “We do have to wait for Treasury to firstly publish the results of its consultation and then move forward with the legislative part.”
Once that’s done, says Boyd, “the FCA will be in a position to take forward those new powers and work out what the regulatory framework is that we will be writing the rules for.” She added that the FCA hopes to field “a great deal” of comments from the industry.
Finally, Boyd thinks tokenization is an aspect of the technology that is likely to shake up the traditional finance world once traditional securities instruments are represented on-chain. She added that trading, settlement, and clearing processes could be “revolutionized.”
FCA crypto advertising deadline looms
Earlier this summer, the FCA told crypto companies advertising in the UK that they have until October 8 to get in line with the regulator’s existing financial promotion regime. All companies have to make an application and pay a fee to get approved.
The regulator isn’t just targeting domestic crypto firms, either. It stated that if a company’s marketing scheme reaches or influences British customers in any way, it will fall under the FCA’s purview.
There will be four routes for legally communicating crypto ads to UK customers, all of which involve getting approval from an FCA-regulated body.
Failure to comply, says the FCA, can result in two years’ imprisonment, a fine, or both.
During her talk, Helen Boyd said that certain firms running late for registration may be able to get an extension: “There are some firms who may need some flexibility. [...] Please come and talk to us. And we may be able to extend some flexibility to you to the new year.”