SEC Commissioner Proposes US-UK Digital Securities Sandbox

TLDR

• SEC Commissioner Hester Peirce proposed a joint digital securities sandbox between the US and UK to allow firms to use specified technologies like DLT.
• The sandbox would give firms an opportunity to operate under the same regulatory requirements in both countries while accessing a larger dataset.
• Peirce believes the US and UK are well-suited for this collaboration due to their shared commitment to capital markets and reputation as financial technology hubs.
• The sandbox could benefit the public by providing access to products and services that might not otherwise be available and help regulators better understand emerging technologies.
• Peirce has previously put forth proposals to allow technological innovation, but other SEC commissioners are not as pro-crypto.

SEC Commissioner Hester Peirce has proposed a joint digital securities sandbox between the United States and the United Kingdom to facilitate innovation in the financial sector.

The sandbox would allow firms to experiment with specified technologies, such as distributed ledger technology (DLT), under the same regulatory requirements in both countries.

Peirce believes that the US and UK are well-suited for this collaboration due to their shared commitment to capital markets and reputation as global financial service providers and technology hubs.

By working together, the two countries could provide firms with access to a larger dataset than either jurisdiction could offer independently.

The proposed sandbox would benefit both regulators and the public. Regulators would gain valuable insights into how emerging technologies operate in real-world conditions, helping them to develop more effective and efficient regulations. Meanwhile, the public would gain access to innovative products and services that might not otherwise be available to them.

Peirce’s proposal would allow firms to operate under their chosen regulatory requirements for a specified period, giving them the flexibility to develop and refine their offerings.

Participating firms would be subject to predetermined monetary and customer ceilings and would be required to comply with general anti-fraud provisions of securities laws.

The cross-border sandbox would focus on the issuance, trading, and clearing of securities using DLT. Experiments could explore the potential benefits of tokenization, such as increased market transparency, fractionalization of assets, and operational efficiencies.

The sandbox could also help to address challenges associated with tokenization, including interoperability issues, cybersecurity risks, and privacy concerns.

Peirce’s proposal reflects her ongoing efforts to foster innovation in the financial sector. In the past, she has put forth proposals to allow firms using newer technologies to be exempt from certain registration provisions under federal securities laws.

However, not all SEC commissioners share her pro-crypto stance, with Chair Gary Gensler favoring a more aggressive regulatory approach.

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