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UK Govt Passes Legislation for Digital Securities Sandbox

The UK's pursuit of the Digital Securities Sandbox (DSS) is a strategic move to boost the sector by fostering innovation and adapting regulatory frameworks

Photo by Photoholgic / Unsplash

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The UK government will pass legislation to implement the Digital Securities Sandbox (DSS), a pioneering initiative aimed at bolstering the nation's digital assets sector. The DSS was part of Chancellor Jeremy Hunt's comprehensive strategy to enhance the UK economy, encompassing 110 measures.

The DSS, overseen by the Bank of England and the Financial Conduct Authority (FCA), is designed to facilitate the adoption of digital asset technology within UK financial markets. This initiative will enable firms to test and develop new financial products and services using digital assets within a modified legislative and regulatory framework.

The initiative is expected to significantly impact the country's financial market infrastructure by allowing the creation and operation of critical systems like central securities depositories and trading venues using digital asset technology. It also opens up possibilities for various assets to be integrated into broader financial activities, including use as collateral.

The DSS is expected to be rolled out in the first quarter of 2024, following the government’s response to a consultation launched in July. HM Treasury noted that industry respondents were "mostly supportive" of its design. It said the feedback "praised the emphasis on facilitating innovation, without compromising on regulatory outcomes."

However, it noted that on unbacked crypto assets, the government "will maintain the policy of exclusion for the DSS… given there is currently no established regime for cryptoassets that could be amended in the Sandbox.”