SEC's crypto-friendly commissioner Peirce proposes US-UK collaboration for digital securities sandbox experiment

The U.S. SEC's crypto-friendly commissioner Hester Peirce proposed a joint U.S.-UK digital securities sandbox DSS experiment, which serves as a safe harbor where companies from both jurisdictions can securely explore securities trading using Distributed Ledger Technology (DLT) without the fear of regulatory scrutiny.

Digital Securities Sandbox (DSS)

The proposal suggests that the U.S. Securities and Exchange Commission establish a micro-innovation sandbox, similar to the digital securities sandbox previously proposed in the UK, where U.S. companies would be able to:

• Trade securities in the U.S. using blockchain technology with set limits on customers and currencies without fear of being targeted by regulatory bodies.
• The sandbox would have a maximum duration of 2 years, with the possibility of extension.
• The SEC's Strategic Hub for Innovation and Financial Technology (FinHub) will assist companies in understanding and participating in the sandbox.
• Companies may choose some of their own regulatory rules, but must comply with certain government guidelines to protect investors.
• If successful in the sandbox trials, companies may be able to graduate and continue their activities under special permits from regulatory bodies.

Peirce stated that sandboxes could allow companies to enter markets without immediately complying with all regulations, providing a manageable entry point for businesses into highly regulated markets. Consumers and investors could also gain access to products and services that were previously unavailable.

UK-US Collaboration, Cross-Border Sandbox More Transformative

Peirce believes that a cross-border sandbox may be more transformative than a purely domestic sandbox. A cross-border sandbox would enable innovators in the U.S. and the UK to benefit from serving markets in both jurisdictions simultaneously. Compared to a single-jurisdiction sandbox, it can also allow regulatory bodies to understand how these complex emerging technologies operate in different environments. A cross-border sandbox could also benefit the public in the UK and the U.S. by encouraging companies registered in one jurisdiction to expand their products and services to another jurisdiction.

Hester Peirce has always been crypto-friendly and is nicknamed "Crypto Mom." She also voted in favor of approving a Bitcoin spot ETF. This digital securities sandbox seems to pave the way for digitized assets and further solidifies the trend of RWA. However, while the UK is already operating the "digital securities sandbox" in collaboration with the central bank and the FCA, which leaves no stone unturned in investor protection and combating illegal use of cryptocurrencies, the U.S. still lacks formal crypto regulations. Whether the cooperation between the U.S. and the UK can accelerate U.S. legislative regulation is also worth observing.

UK's "Digital Securities Sandbox" terms will take effect in January next year! FCA collaborates with the central bank to test tokenization technology.