ClearToken is proud to announce its admission into the Bank of England’s Digital Securities Sandbox (DSS) as a Sandbox Entrant, as it seeks to ultimately operate as a Digital Securities Depository (DSD) for digital securities. Overseen by the Bank of England and the FCA, admission and passage through “Gate 1” of the DSS marks a major milestone which reflects our commitment to building the financial market infrastructure (FMI) necessary to support the evolution of digital asset and tokenisation markets*. Our Sandbox Approval Notice is available here on the Bank of England website.

At ClearToken, we strongly believe in the importance of a robust legal and regulatory framework to empower FMI, establish settlement finality and real-world enforceability, and deliver the critical post-trade functions to digital assets that financial intermediaries have provided in traditional markets for decades. Without this infrastructure, digital exchanges and intermediaries are forced to offer post-trade and custodial-style services without underpinning legal certainty leaving potentially significant risks to market stability.

The Role of Regulation in Digital Asset Markets

The desired outcomes for digital asset markets are no different from those of traditional financial markets: stability, market legitimacy and institutional confidence.

In the absence of mature oversight, digital assets present new opportunities for market abuse and manipulation. Regulation prevents these risks, providing a foundation for institutional adoption, which is essential for expanding market capitalization and unlocking the transformative potential of digital assets. A 2023 survey revealed that 34% of global institutional investors cited regulatory uncertainty as the primary barrier to investing in digital assets.

The UK as a Leader in Digital Asset Regulation

The proactive stance of the UK government and regulators through initiatives like the DSS is a major step forward. By enabling innovative technology to operate in a live environment, the UK creates a pathway for legal frameworks to support real-world applications. With the Financial Services and Markets Act (FSMA) updated to include ‘cryptoasset activities’ and grant powers for a regulatory regime around digital settlement assets, the UK is positioning itself as a global leader in setting standards for digital asset markets.

A future comprehensive, gold-standard regulatory regime in the UK not only protects the market but also makes the UK an attractive, secure destination for international institutions to engage in digital asset and tokenisation activities. Regulatory clarity will provide the stability necessary for responsible market stewardship and builds confidence among participants.

Looking Ahead

ClearToken is grateful for the guidance and support provided by the Bank of England during the DSS consultation and application process. With this milestone, we are excited to contribute to the development of a secure and efficient digital securities settlement system and look forward to our next steps testing the DSD platform and processes in a non-live environment in preparation for passage of “Gate 2”.

Together with our partners and regulators, we aim to establish the trust, stability, and infrastructure that will drive institutional adoption and position the UK at the forefront of the global digital economy.

In the coming weeks, ClearToken will publish a new white paper exploring some of the critical legal and regulatory impacts that a DSD will have for the secure growth of digital asset and tokenised markets.

To discuss this further or for more information, please contact us at info@cleartoken.io.

* ClearToken CSD Ltd has been admitted to the FMI Digital Securities Sandbox having passed “Gate 1”. This admission does not provide ClearToken with permission to carry out live activity which will only be granted once ClearToken CSD Ltd has passed “Gate 2”. More information on the DSS can be found on the Bank of England’s DSS website.