Starting Jan. 8, 2024, the Financial Services and Markets Act of 2023 will apply to companies participating in and applying to the Digital Security Sandbox, according to documents released Monday.
UK-based investment exchanges, recognized central counterparties and central securities depositories and investment firms are permitted to apply to participate in the sandbox, the regulations state.
The program is designed for applicants looking to operate trading venues and intermediaries providing services to digital asset companies.
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Digital assets and distributed ledger technology (DLT) could be used by what it calls financial market infrastructures (FMIs) — networks that allow financial transactions to take place — to boost efficiency and cost effectiveness, government officials said.
The “appropriate regulator,” as determined by the type of applicant, will decide whether or not a company is admitted to the sandbox program, the regulations add.
The UK announced the sandbox earlier this year and the Financial Conduct Authority (FCA) and the Bank of England collaborated with HM Treasury to establish the guidelines.
“It is important that this does not lead to inertia in the legislative and regulatory space, but to acknowledge instead that the job of re-working financial services legislation and regulation will be an ongoing process that may take many years,” HM Treasury said in an August report.
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The regulations published Monday follow the “Call for Evidence” HM Treasury conducted in 2021 to examine the application of DLT and FMIs.
The agency then published a response in April 2022, which stated that the UK’s legislative framework was not built to support the use of DLT, adding that testing would be needed.
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