Hester Peirce proposes for cross-border digital securities sandbox

SEC Commissioner Hester Peirce proposed a cross-border digital securities sandbox in response to a joint consultation by the Bank of England and the Financial Conduct Authority (FCA).

The proposal aims to foster innovation and enhance regulatory oversight by allowing firms in both the United Kingdom and the United States to experiment with distributed ledger technology (DLT) under a unified regulatory framework.

“This joint proposal reflects a commendable commitment to incorporating innovation into the financial system,” Peirce stated in the response.

She advocated for including US-domiciled firms in the UK’s digital securities sandbox (DSS), suggesting that expanded eligibility would promote cross-border innovation.

Peirce emphasized the benefits of a cross-border sandbox, which allows firms to operate under the same regulatory conditions in both jurisdictions. She also mentioned the success of the FCA’s sandbox, where firms have raised more capital and refined their business models through real-world testing.

🚨NEW: @SECGov Commissioner @HesterPeirce has announced a proposal for a joint US/UK “digital securities sandbox” — a special safe harbor where companies in both jurisdictions can safely experiment using blockchain technology for trading securities without fear of regulatory…

— Eleanor Terrett (@EleanorTerrett) May 30, 2024

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“Sandboxes have proven effective in facilitating innovation in highly regulated sectors,” Peirce noted.

She also pointed out that regulators gain valuable insights into emerging technologies, with 85 percent of sandbox regulators reporting that sandboxes help assess the appropriateness of legal or regulatory frameworks.

Peirce concluded by stressing the transformative potential of a cross-border sandbox, which could enhance market transparency, enable asset fractionalization, and reduce costs.

“This consultation offers a timely opportunity to discuss greater cross-border collaboration in facilitating innovation,” she said.

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