FCA accepts 29 businesses into cohort 5 of its regulatory sandbox

Maria Nikolova

The list of approved projects includes a test that will integrate DLT within LSEG-operated listing and trading venues to test market infrastructure for the issuance of equity securities, evidencing the change of beneficial ownership.

The UK Financial Conduct Authority (FCA) has earlier today provided an update on the progress of its regulatory sandbox.

The FCA says that a total of 29 businesses have been accepted into cohort 5 of the regulatory sandbox to test innovative products, services, business models and delivery mechanisms.

The regulator received 99 applications to cohort 5 of the regulatory sandbox – the largest number of applications it has received to date. Applications came from firms operating in the UK and overseas. The majority of applications came from firms looking to operate in the wholesale and retail banking sectors.

Examples of propositions that have been accepted include digital identity solutions, platforms which tokenise issuance of financial instruments, and services aimed at facilitating greater access to financial services for vulnerable consumers.

Tests will be conducted on a short-term and small-scale basis. The FCA works closely with each firm to agree testing parameters and build in appropriate consumer safeguards.

Let’s recall that more than 40% of companies accepted to cohort four are using distributed ledger technologies (DLT). Of these, six are using DLT to automate the issuance of debt or equity. Two are using DLT to support the provision of insurance. Other technology applied includes geo-location technology, use of Application Programming Interfaces (APIs) and artificial intelligence.

Alike cohort four, cohort five also includes a number of firms willing to conduct DLT-related experiments. The list of such companies includes London Stock Exchange Group. A test will integrate DLT within LSEG-operated listing and trading venues to test market infrastructure for the issuance, admission and trading of equity securities, evidencing the change of beneficial ownership. LSEG has invited Nivaura and select market practitioners along the value chain to participate as part of this test.

Another interesting fintech project has been proposed by Standard Chartered. The project involves an application that uses tokenisation to facilitate the issuance of retail bank deposits that are backed by FSCS protected fiat funds. The aim is to enable consumers to receive economic benefits from longer-tenor deposits while maintaining flexible and easy access to their deposited money.

Another of the approved projects comes from Digital Wealth Solutions. The initiative focuses on a digital platform for financial advice firms to support the provision of regulated advice and an ongoing service to clients. The platform complements the traditional face-to-face approach and aims to improve adviser production, moderate the cost of providing advice and increase access to advice.

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