UK to Cooperate With Crypto Industry on Legislation for Digital Securities

The U.K. government said it plans to continue working with the financial services and technology industries to establish the legislation needed to pave the way for digital securities as it pursues its goal of becoming a hub for the crypto industry.

The design of a planned digital securities sandbox (DSS) that lets companies test new products with real customers under regulatory supervision was generally welcomed by respondents to a consultation distributed in July, the Treasury said Wednesday. Many respondents emphasized the need for the rules within the sandbox to remain flexible so it can adapt to novel use cases. They also asked for more clarity about tax treatment within the sandbox.

The DSS will be overseen by the Bank of England and the Financial Conduct Authority, according to draft legislation published Monday. It will allow businesses to test the distributed ledger technology that powers crypto to digitize or tokenize traditional securities and represent them on a blockchain. The government said it planned to include assets including debt, equity and money-market instruments within the scope of the sandbox, something respondents had requested.

“The government will work with the regulators and industry to identify any further legislative provisions that need to be brought into scope, and if necessary can facilitate this via further statutory instruments amending the DSS,” the consultation response said.