Hester Peirce proposes for cross-border digital securities sandbox

SEC Commissioner Hester Peirce has 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 stimulate innovation and improve regulatory oversight by allowing firms in both the UK and US to trial distributed ledger technology (DLT) under a unified regulatory framework.

“This joint proposal reflects the laudable commitment to incorporating innovation into the financial system,” Peirce said in his response.

He advocated for the inclusion of US-based firms in the UK’s digital securities sandbox (DSS), suggesting that expanded eligibility would encourage cross-border innovation.

Peirce emphasized the benefits of a cross-border sandbox that allows firms to operate under the same regulatory conditions in both jurisdictions. He also talked about the success of the FCA’s sandbox, where firms raise more capital and improve their business models through real-world testing.

🚨NEW: @SECGov Commissioner @HesterPeirce US/UK announced a proposal for a joint “digital securities sandbox”; This is a private safe haven where companies in both jurisdictions can safely experiment with blockchain technology for trading securities without fear of regulatory sanctions…

— Eleanor Terrett (@EleanorTerrett) May 30, 2024

“Sandboxes have proven effective in facilitating innovation in highly regulated industries,” Peirce said.

He also noted that regulators gain valuable information about emerging technologies; 85 percent of sandbox regulators reported that sandboxes help assess the suitability of legal or regulatory frameworks.

Peirce concluded by highlighting the transformative potential of a cross-border virtual space that could increase market transparency, enable asset fragmentation, and reduce costs.

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