On October 1, 2024, the UK's Financial Conduct Authority (FCA) and the Bank of England launched the next phase of their Digital Securities Sandbox (DSS), aimed at enabling firms to explore distributed ledger technology (DLT) and tokenized securities in traditional financial markets.
The DSS will operate until December 2028, providing a structured environment for testing DLT applications to enhance market efficiency, transparency, and resilience. This initiative positions the UK as a leader in financial innovation, fostering investment and sustainable growth.
Activities will commence after the Gate 2 stage, involving the issuance, trading, and settlement of actual digital securities, which will operate similarly to traditional financial instruments. Eligible assets include equities, corporate and government bonds, and money market instruments.
Applications are open to UK-based firms until approximately March 2027, allowing time for regulators and firms to prepare for a potential new permanent regime. The FCA and the Bank of England also released Policy Statement PS24/12, outlining final policies and industry feedback adjustments, including a reduction in the minimum capital requirement for a Digital Securities Depository (DSD) to six months of operating expenses.
The DSS aims to explore blockchain's potential within the UK's financial markets while ensuring financial stability and market integrity, contributing to a safe and efficient financial system.