Britain makes crypto technology a priority for streamlining markets

• Britain will launch a financial market infrastructure “sandbox” next year for testing DLT projects under control of regulators.
• The sandbox is a testing environment for projects involving real customers.
• A new financial services bill currently before parliament will include the sandbox, as well as regulation for stablecoins.

Britain will begin live testing of crypto blockchain technology for traditional market activities such as trading and settlement of stocks and bonds next year as part of a drive to become a global “crypto hub”, the finance ministry said on Tuesday.

Gwyneth Nurse, the ministry’s director general for financial services, said the use of distributed ledger technology (DLT), which underpins cryptoassets, is a key priority for making financial market infrastructure more innovative and efficient for users.

Britain will launch a financial market infrastructure “sandbox” next year for testing DLT projects under control of regulators, Nurse said, a model UK regulators pioneered for nurturing fintech firms. A sandbox is a testing environment for projects involving real customers.

Trading of stocks, bonds, and other assets in financial markets generally comprises three distinct activities: trading, clearing, and settlement. Using DLT, this might change, allowing financial instruments like bonds and stocks to be issued in hours instead of days or weeks.

Nurse said at the annual IDX derivatives conference in London that the government might wish to test how trading and settlement could be combined.

“A sandbox will enable market users to test new regulatory best practises and make permanent modifications to ensure that they benefit.”

A new financial services bill currently before parliament will include the sandbox, as well as regulation for stablecoins – cryptocurrencies backed by traditional financial assets.

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Last month, industry insiders told Reuters that a digital currency will be required to fully realise the benefits of DLT in market infrastructure. find out more

According to Nurse, the finance ministry and the Bank of England are jointly evaluating a digital pound, with a public consultation to follow later this year.

Even if a decision is made to move forward with a so-called central bank digital currency, or CBDC – which other central banks are also considering — a digital pound would not be ready until the second half of the next decade, according to Nurse.

The European Union is finalising its own market sandbox and new crypto market rules.

“The EU is making significant progress,” Julia Kolbe, Head of Markets Policy, Government & Regulatory Affairs at the European Commission, stated.

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