Experimenting with the distributed ledger technology: A comparison between the EU DLT Pilot Regime Regulation and the UK Digital Securities Sandbox
43 Pages Posted: 24 Sep 2024
Date Written: August 24, 2024
Abstract
This article provides a comprehensive comparison between the European DLT Pilot Regime Regulation and the UK Digital Securities Sandbox, which both have the intention for market infrastructures to experiment with the distributed ledger technology (DLT). It has been documented that regional regulatory sandboxes can raise the concern of potential regulatory arbitrage and a 'race to the bottom' competition among jurisdictions, which necessitates a detailed examination of whether one sandbox is more flexible or easier to experiment with compared to another. The paper concludes that the UK DSS provides more flexible powers to the UK authorities and is broader in scope in terms of potential participants, the type of technology one can experiment with, the type of activities that can be performed, the type of financial securities one can experiment with, and the limits participants are subject to. Yet, this paper does not conclude that the UK DSS is in general less stringent than the EU DLT Pilot Regime as no deregulation is foreseen in the UK DSS for trading venues that want to experiment with the technology. In addition, the UK foresees a stringent structured approach with 'stages' and 'gates' to be passed to continue the experimentation.
Keywords: trading and post-trading, distributed ledger technology, blockchain, financial innovation, financial regulation
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