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  • L Misthos and M Bacina

UK to launch Digital Securities Sandbox to play with tokenisation

The British Treasury is looking to launch a Digital Securities Sandbox (DSS) next year for interested parties to test digital technologies and functions, such as tokenisation of real world assets. The DSS is expected to be available at the end of Q1, 2024.

The Head of Capital Markets at the Financial Conduct Authority (FCA) in the United Kingdom, Helen Boyd, speaking at CCData's Digital Asset Summit recognised the innovation of the DSS:

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.

While digital asset regulation is seemingly a top priority for overseas regulators, and the FCA is committing to practical learnings and embracing the innovative technology, Australia is still awaiting consultation on licensing and custody rules, which has been expected to arrive for months now.

Although Australia's Reserve Bank's CBDC Pilot for Digital Finance Innovation report recommends a sandbox approach to enable future industry experimentation and test new financial products and services, there is no word on any plans for such a sandbox in future.

Similarly, the New Zealand Parliament's Finance and Expenditure Committee released a report recommending a sandbox approach for digital assets and even argues the success of similar sandboxes in the UK, but has not announced a sandbox collaboration with stakeholders as yet.

Meanwhile, the European Union is moving ahead with its sandbox for Distributed Ledger Technology launched earlier this year in parallel with its efforts to provide a comprehensive framework to regulate crypto assets under the Markets in Crypto Assets Regulation which will enter in force beginning next year.

With the existing Australian regulatory sandbox not viewed as appropriate for crypto-assets and a regulation by enforcement narrative taking hold, the flight risk for Australian founded crypto-businesses seems only likely to increase. The opportunity remains for Australia to join the global digital assets race by launching its own blockchain sandbox to enable testing of new blockchain based offerings and help develop the right regulatory settings for innovative products and services.

By Michael Bacina, Steven Pettigrove and Luke Misthos


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