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UK Treasury to Test 5-Year Digital Securities Trial: Could Make Markets More Efficient

• The UK Treasury is starting a 5-year digital securities trial to relax regulations for digital bonds and equities.
• It does not apply to unbacked cryptocurrencies, such as Bitcoin or Ether, nor derivatives.
• The new rules could make financial markets more efficient, transparent and resilient.

UK Treasury’s Digital Securities Trial

The UK Treasury has launched a consultation on Tuesday to test out the potential of distributed ledger technology (DLT) for digital bonds and equities over the next five years. This pilot program would relax regulations with the aim of making markets more efficient, transparent and resilient.

Regulations Relaxed For Five Years

The trial period may last up to five years and will apply as a minimum to digital equities, bonds and money market instruments – but not derivatives or unbacked cryptocurrencies such as Bitcoin or Ether.
This comes after the Financial Services and Markets Act was signed into law two weeks ago which gave the Treasury new powers in this area.
The new rules could allow securities trades to “deviate substantially from existing practice” by operating overnight or at weekends, allowing trades to be settled immediately rather than after a few days.

Cryptoasset Hub Vision

Last year Rishi Sunak said he wanted to make the U.K. a cryptoasset hub, leading proposals on stablecoins, crypto promotions and a digital pound that would potentially be issued by the Bank of England – however industry players have complained ministers aren’t acting quickly enough compared to rival jurisdictions such as the EU who are already looking ahead with their Markets in Crypto Assets Regulation set for implementation next year along with their own pilot project testing DLT securities trading currently underway .

Industry Reaction

Industry reaction has been mixed so far with some welcoming this move towards greater innovation while others take issue with some of its specific details such as how it doesn’t include unbacked cryptocurrencies like Bitcoin or Ether in its scope .

Call For Evidence

The government is inviting evidence from market participants throughout July before deciding whether or not to proceed with the sandbox trial later in 2021 .