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The Bank of England (BoE) and the Financial Conduct Authority (FCA) are set to take on a “proactive” and flexible regulatory approach through the Digital Securities Sandbox (DSS). According to BoE Executive Director Sashi Mills, this initiative signifies “a cultural shift for regulators.”
At City Week 2024, Mills <a href="https://www.bankofengland.co.uk/speech/2024/may/sasha-mills-keynote-address-at-london-city-week" target="_blank" rel="noopener noreferrer nofollow">discussed</a> the financial markets, the role of innovation in maintaining financial stability, and the DSS’s role “to support innovation.”&nbsp;
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 “Our attitude to innovation is, therefore, important. This is a cultural shift for regulators, and it means thinking differently.”
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The DSS will function under “a more flexible rulebook,” capable of adapting based upon “observations from activity in the DSS.” Mills says this will allow regulators to employ new methodologies, maximize the potential benefits of innovation, and “manage financial stability risks.”&nbsp;
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 “Where the fundamental processes are still intact, reactive regulation is still an effective tool to address risks that emerge. But for wholly new innovative approaches, we think it is important to engage proactively in the development phase.”
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Mills infers that this “proactive approach” will enable the BoE and the FCA to allow firms to use “developing technologies that would otherwise not be permitted.” This includes using digital ledger technology (DLT) — technology that allows the issuing, trading, and settling of securities — through the DSS.
Related:&nbsp;<a href="https://cointelegraph.com/news/bank-england-fca-launch-digital-securities-sandbox" rel="noopener noreferrer nofollow">Bank of England and FCA launch Digital Securities Sandbox for DLT testing</a>
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 “This will consider new technology and approaches to regulated activities under a flexible, more proportionate rulebook. To maintain wider financial stability and market integrity there will be some limits on activity in the DSS.”
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Firms known as Digital Securities Depositories (DSDs) working within the DSS will be limited in the value of securities they are permitted to handle. These limits will be adjusted as firms demonstrate their ability to meet regulatory standards.
Through DLT, the DSS aims to mitigate inefficiencies in “post-trade environments” that Mills says could “lower the barriers to entry for providers” while improving financial market resilience.
Mills’ elaboration on the remit and implications of the DSS follows from <a href="https://cointelegraph.com/news/fca-crypto-regulators-tradfi-defi" rel="noopener noreferrer nofollow">FCA executive Matthew Long’s announcement</a> on May 8 that the regulatory body would be combining “the best of traditional finance” and decentralized finance (DeFi).
Magazine:&nbsp;<a href="https://cointelegraph.com/magazine/bitcoin-stacks-price-predictions-cryptocurrency-daan-crypto-trades-hall-of-flame/" rel="noopener noreferrer nofollow">If Bitcoin doubles, Stacks will 4x in 2025: Daan Crypto Trades, X Hall of Flame</a>

BoE regulatory 'culture shift' could open door to new tech

Cointelegraph

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