FCA Approves Blockchain, Crypto Firms for 4th Cohort of Regulatory Sandbox

The regulator is assessing different options to scale up the model at global level.

The Financial Conduct Authority, FCA, today unveiled the firms that were successful in their applications to begin testing in the fourth cohort of the sandbox. The City regulator has named “a small number” of crypto-linked firms as having been accepted to test their solutions and business models in a live market but controlled environment.

The UK finance regulator received 69 submissions for the fourth phase of the regulatory sandbox. 29 applications met the eligibility criteria and were accepted to develop towards testing.

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In addition, the watchdog said that over 40 percent of companies accepted to cohort four are using blockchain technology. The FCA explained that it wants to “explore whether, in a controlled environment, consumer benefits can be delivered while effectively managing the associated risks.”

Following its installment in 2016, the FCA’s regulatory sandbox has allowed nearly 100 firms to test their innovation with real customers, but all with requisite safeguards in place. The sandbox allows successful new business applicants to carry out a trial-run on consumers for three to six months.

Overall, the initiative has proven highly successful in terms of oversight and analysis. As such, the regulator is assessing different options to scale up the model at a global level.

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The first of the new crypto businesses to receive approval is TokenCard, described as a “depositless Ethereum token-based debit card & platform.” The firm is said to enable users to load cryptocurrency onto a card and use it like any other credit or debit card.

Another one is Fineqia, which is a blockchain-based digital platform that allows companies to issue and administer debt and equity securities, including bonds backed by crypto assets.

Last week, the UK Prudential Regulation Authority issued a letter to CEOs of banks, insurance companies, and investment firms to advise them about the risks associated with “crypto-assets.” The PRA’s letter has provided the financial operators with guidelines to improve their oversight, increase scrutiny and enhance due diligence checks.

Commenting on the news, Christopher Woolard, director of Strategy and Competition at the FCA, said: “I am pleased to say that this is the largest sandbox cohort to date with a record number of applicants meeting our eligibility criteria. Cohort 4 has seen a large increase in the number of firms testing wholesale propositions including firms that are aiming to increase the efficiency of the capital-raising process. Alongside these, we can see significant use of distributed ledger technology (DLT), some experimentation with crypto assets which will help inform our policy work and propositions aimed at helping lower-income consumers.”


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