UK Government Tests Crypto Blockchain Technology For Traditional Markets And Stock Trading

- UK will start live testing on crypto blockchain technology. (photo: doc. pixabay)

JAKARTA - The UK will start hands-on testing of crypto blockchain technology for traditional market activities such as trading and settlement of stocks and bonds next year. This test, according to the UK Ministry of Finance on Tuesday, June 7 as part of efforts to become a global "crypto hub",

Gwyneth Nurse, Director General of the Ministry for Financial Services, said the use of distributed ledger technology (DLT), which underpins crypto assets, is a top priority to make financial market infrastructure more innovative and efficient for users.

"The UK will launch a "sandbox" financial markets infrastructure next year to test DLT projects under regulatory control," Nurse said. The model pioneered by British regulators is to nurture fintech companies. Sandbox is a test environment for projects involving real customers.

In financial markets, trading in stocks, bonds and other assets traditionally involves three distinct activities namely trading, clearing and settlement. Using DLT can change this and allow financial assets such as bonds or stocks to be issued in hours instead of days or weeks.

"The government may also want to test how trade and settlement can be unified," Nurse said at the IDX's annual derivatives conference in London. "The sandbox will allow to test new regulatory best practices and make permanent changes to ensure market users benefit."

The Sand Box will be introduced, along with regulations for stablecoins – cryptocurrencies backed by traditional financial assets, under a new financial services bill before parliament this year.

Industry officials told Reuters last month that digital currencies would be needed to reap the full benefits of DLT in market infrastructure.

"The Treasury and the Bank of England are jointly assessing the digital pound with further public consultation later this year," Nurse said.

But the digital pound won't be available until the second half of the next decade even if the decision is made to proceed with a so-called central bank digital currency or CBDC - which other central banks are also looking at, according to Nurse.

The European Union itself is finalizing its own Sand Box– for markets and new rules for the crypto market.

"The EU is making a lot of progress," said Julia Kolbe, Head of Market, Government & Regulatory Policy Advocacy at Deutsche Bank.