The Bank of England and the FCA launched their tokenized test environment today. A sandbox disables certain rules, allowing organizations to experiment with blockchain.
A project by UK regulators to unlock a $14 trillion opportunity — the tokenization of financial assets — is open for business, analysts say.
The Bank of England and the Financial Conduct Authority opened applications for their digital securities sandbox on Monday. They asked UK based companies to sign up.
The sandbox essentially allows organizations that provide plumbing for financial markets — stock exchanges, for example — to take advantage of exemptions to existing financial regulation so they can tinker with blockchain technology.
Financial institutions believe blockchain will speed up settlement, the process that takes place after a financial asset is sold, reducing risk and making transactions cheaper for investors.
The FCA said blockchain could “improve efficiency and reduce costs in wholesale markets, benefiting the industry and investors”.
As this technology could introduce new risk, it should be experimented with with regulators, the watchdog added.
Institutions' blockchain experiments are “live” and regulators intend for the broader financial ecosystem to interact with them with common services.
If these experiments are successful, regulators will make their changes to the rules permanent.
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Huge potential
Regulators and the private sector see huge potential for blockchain technology in making financial markets more efficient.
Financial giants like BlackRock, as well as central banks, are excited about tokenization.
And no wonder. Consultant Oliver Wyman predicts asset tokenization could reach $14 trillion By 2030
UK regulators announced the sandbox in January and consulted with the financial industry on how it would work.
Getting it right is important — a parallel project in the EU has largely failed. This is partly due to design flaws as the project does not allow tokenized settlement.
Crypto market movers
Bitcoin is trading down 3% today at $63,823. Ethereum is trading at $2,620, down 1.2% in the last 24 hours.
What are we studying?
Gary Gensler reiterated in the speak that Coinbase and DeFi should be defined as 'exchanges'.'- Not boundMicroStrategy's stellar performance won't lead to S&P 500 inclusion anytime soon – Milk RoadFTX's bankruptcy estate revealed that up to $230 million will be set aside for certain shareholders – Not boundChina's former finance minister calls crypto a key component of the digital economy – News
Joanna Wright is Regulation Correspondent News. Got a tip? Email at [email protected].
