Gwyneth Nurse, the minister’s chief financial services officer, said the use of distributed ledger technology (DLT), which underpins crypto-assets, is a key priority for making financial market infrastructure more innovative. and more efficient for users.
Britain will launch a financial markets infrastructure “sandbox” next year to test DLT projects under the scrutiny of regulators, said Nurse, a model pioneered by UK regulators to nurture investors. fintech companies. A sandbox is a testing environment for projects involving real customers.
In financial markets, trading in stocks, bonds and other assets traditionally involves three distinct activities: trading, clearing and settlement. The use of DLT could change this and allow financial assets such as bonds or stocks to be issued within hours rather than days or weeks.
“The government might also want to test how trading and settlement might be brought together,” Ms Nurse told the annual IDX derivatives conference in London.
“A sandbox will test new regulatory best practices and make permanent changes to benefit market users.”
The sandbox will be introduced, along with the regulation of stablecoins – cryptocurrencies backed by traditional financial assets, as part of a new Financial Services Bill before Parliament this year.
Industry officials told Reuters last month that a digital currency will be needed to realize the full benefits of DLT in market infrastructure.
The Treasury and the Bank of England are jointly assessing a digital pound with further public consultation later this year, Nurse said.
But a digital pound would not be available until the second half of the next decade, even if the decision is made to go ahead with a central bank digital currency or CBDC – which other central banks are also considering – at said Nurse.
The European Union is finalizing its own sandbox for markets and new rules for crypto markets.
“The EU is making a lot of progress,” said Julia Kolbe, head of market policy, government and regulatory advocacy at Deutsche Bank.