The joint consultation by the Bank of England and the Financial Conduct Authority (FCA) on the UK's digital securities sandbox has concluded, shedding light on the key issues and opportunities in the space. The consultation primarily focused on two major areas: limits and digital currency.

The five-year digital securities sandbox, which began in January this year, has temporarily eased some legal requirements for Central Securities Depositories (CSDs) and supported experiments with Distributed Ledger Technology (DLT) and tokenization. Despite the core function of CSDs being settlement, and blockchain having an advantage in instant settlement, there was little discussion on this issue in the consultation document.

The document mentioned that the Bank of England is considering using its Real-Time Gross Settlement (RTGS) system for synchronous settlement, but it did not specify whether or when this could be achieved. Furthermore, it mentioned the central bank's comprehensive account facilities but did not explicitly mention Fnality, which uses comprehensive central bank accounts as the basis for its tokenized settlement infrastructure. Fnality has been launched in the UK, but in a controlled manner limited by the Bank of England.

UK Finance believes that not using on-chain digital currency is a missed opportunity, especially disadvantageous for non-banking institutions. Given that Fnality is only available for banks, this puts non-banking institutions in the sandbox at a competitive disadvantage. The report did not mention stablecoins, but UK Finance stated that the use of stablecoins is limited. The Global Blockchain Business Council and the International Regulatory Strategy Group (IRSG) also called for the use of systemic stablecoins in the sandbox.

Regarding limits, UK Finance suggested setting them individually for each company, rather than globally. The IRSG warned that low limits could hinder the sandbox from attracting a large number of institutions, especially when testing large-scale projects like digital gold bonds. Moreover, the IRSG mentioned that many legal adjustments simply clarify that digital securities are subject to existing laws. The GBBC emphasized that the sandbox design is more inclined towards existing institutions, with high participation costs for startups and dual compliance requirements. ICMA and other respondents called for increased flexibility in various aspects to make the sandbox easier to use, but this would increase the regulatory workload.