His Majesty’s Treasury (HMT) published the responses to the Digital Securities Sandbox consultation it launched in July. So far 19 organizations have expressed interest and the Government is still open to other potential applicants. The five-year Sandbox will support the relaxation of certain regulations to trial the tokenization of securities and DLT market infrastructures. The Bank of England and Financial Conduct Authority (FCA) will supervise the Sandbox.
The initial consultation said the assets in scope would include debt, equity and money market instruments but not cryptocurrencies. Consultation responses asked for clarification and suggested equity-like instruments such as depository receipts, UCITS and other funds, gilts and Treasury bills, mortgage backed securities and tokenized commodities.
In response, the government said all assets “currently in scope of the regulatory perimeter, aside from derivatives” can potentially be included. That includes collective investments excludes cryptocurrency. The reason for excluding derivatives is that there are no plans to alter derivatives legislation within the Sandbox. However, derivatives that refer to sandbox securities are allowed, but the derivatives themselves have to comply with unamended regulations.
Sovereign debt might be included later, but initially the focus is on private sector debt instruments. Each applicant will be informed which specific asset classes are in scope for them.
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