Why UK’s FCA Plans To Launch Another Digital Securities Sandbox

The United Kingdom’s Financial Conduct Authority (FCA) is about to launch its second crypto sandbox, which comprises set rules to govern digital securities. According to the FCA’s head of capital markets, Helen Boyd, the UK Treasury will release the Digital Securities Sandbox in Q1 of 2024.

This development comes about two months after the FCA permanently rolled out the UK’s first Digital Sandbox on August 1. The first sandbox comprised data sets and insights designed to foster innovation and growth and encourage international competitiveness for tech startups.

UK Treasuries Introduces Sandbox To Encourage Digital Securities Adoption 

During the CCData Digital Asset Summit on October 3, Helen Boyd announced that the Royal Treasury will launch the new sandbox by the end of the first quarter of 2024. Although an independent financial watchdog, the FCA remains under the UK Treasury’s oversight.

Further, Boyd revealed that the forthcoming Digital Securities Sandbox (DSS) differs from the existing Digital Sandbox as it will enable the testing and adoption of digital securities across financial markets. According to the announcement, it will allow companies to set up financial market infrastructures using digital asset technology. 

In addition, these financial market infrastructures can perform digital securities-related activities. However, the resulting financial products will be subject to a temporarily modified legislative and regulatory framework. 

The upcoming sandbox will have new rules that foster innovation using digital securities. It will be the first financial market infrastructure sandbox deployed under the Financial Services and Markets Act 2023.

Also, Boyd further explained the FCA’s future as the primary crypto assets regulator in the UK. She said the agency awaits the Treasury’s resolution on the share of power it would hold over the digital asset industry. 

The FCA had previously opened a consultation on the Digital Securities Sandbox, inviting respondents to express interest in using DSS. The consultation started on July 10 and ended on August 22, 2023.

UK Government To Tackle Financial Services-related Scam And Fraud

The soon-to-launch DSS comes amid strict oversight on crypto assets in the United Kingdom and the UK Treasury is considering imposing a blanket ban on digital assets cold calls. 

In August, the Treasury released a consultation paper to assess the grassroots impact of banning financial services-related cold calls. It called for evidence to assess the full impact on businesses, including the proposed ban’s cost.

The growing incidence of fraud-related cold calls for financial products targeting vulnerable consumers has become alarming. The National Crime Agency’s estimates revealed that the UK lost $8.7 billion annually to fraud. 

In the August published consultation paper, Andrew Griffith, the Treasury’s economic secretary, frowned at the increased financial product cold calls. He noted that the government will not tolerate such. 

Also, on May 3, the UK government launched a progressive fraud-curbing strategy involving introducing 400 new police intelligence-related jobs.