The UK will begin field testing the introduction of blockchain technology into traditional market activities such as stock and bond trading and settlement as part of its efforts to become a global “cryptocurrency hub.”
In a statement released by the Treasury Department on Tuesday, June 7, Financial Services Commissioner Gwyneth Nurse said that the adoption of distributed ledger technology (DLT) – the technology underlying cryptocurrencies – is a key priority in the department’s efforts to make financial market infrastructure more inventive and user-friendly. Reuters report.
According to Nurse, the UK plans to create a “sandbox” next year to test DLT initiatives within its financial market infrastructure.
This is a paradigm pioneered by UK authorities to nurture fintech companies, specifically the sandbox, a testing environment used for initiatives involving real customers.
UK to streamline efforts to become global 'cryptocurrency hub'
Trading stocks, bonds and other assets in financial markets often requires three separate processes: trading, clearing and settlement.
These activities are completely separate from each other. This could change with the use of DLT, allowing financial instruments such as bonds and stocks to be issued in hours rather than days or weeks.
In particular, Nurse said at the annual IDX Derivatives Conference in London:
“Governments may also want to test how trading and payments can be integrated.”
She added:
“The sandbox will enable us to test new regulatory best practices and make permanent changes to benefit market users.”
New financial services legislation is due to be introduced in parliament this year, which will include both sandboxes and the regulation of stablecoins, which are cryptocurrencies backed by regular financial assets.
Nurse said the Treasury and the Bank of England were working together to study the feasibility of a digital version of the pound, with further public consultations due to take place later this year.
Even if a decision is made to introduce a CBDC, which other central banks are also considering, Nurse suggested a digital pound would not be ready until the second half of the decade.
