The Bank of England (BoE) and the UK’s Financial Conduct Authority (FCA) have launched a new sandbox aimed at examining the use of digital ledger technology (DLT) for the notarization, management, and settlement of financial securities. Announced on September 30, the Digital Securities Sandbox (DSS) is designed to enable firms to investigate the advantages DLT can bring to the financial securities sector.

The FCA recognized that innovative technologies could significantly improve market efficiency, transparency, and resilience. Successful implementation of these technologies could lead to reduced costs and expedited processes for market participants. The DSS will support the issuance, trading, and settlement of digital securities in the UK while ensuring compliance with BoE and FCA regulations.

This initiative is seen as a way to enhance the UK’s position as a leading global financial center by fostering a conducive environment for investment and sustainable development. Firms of all sizes, including established financial institutions and new entrants, can apply to participate in the DSS, as long as they are legally registered in the UK. The DSS will operate until December 2028, with applications closing in March 2027, allowing time for a potential shift to a permanent framework.

The BoE has outlined a four-stage approach for the DSS: testing, go-live, scaling, and establishing a permanent regime. During the second phase, the sandbox will facilitate the issuance, trading, and settlement of actual digital securities that function similarly to traditional ones. These may include equities, corporate and government bonds, money market instruments, fund units, and emissions allowances. The BoE also highlighted its collaboration with the FCA to achieve key objectives: promoting a secure, efficient, and sustainable financial system, safeguarding financial stability, and maintaining market integrity.