The Bank of England (BoE) and the Financial Conduct Authority (FCA) are eyeing autumn 2024 for the debut cohort of participants in the UK Digital Securities Sandbox (DSS), designed to facilitate the adoption of digital assets within financial markets.

Presently, the central bank and regulatory body are seeking feedback on their proposed operational framework for the DSS, with plans to open applications during the summer.

In a joint consultation and draft guidance released on Wednesday, the BoE and the FCA outlined their aspirations for the inaugural group of entrants into the Digital Securities Sandbox, a venture aimed at fostering innovation in digital assets. This initiative involves adapting regulations to permit eligible UK firms to utilize emerging technologies, such as blockchain and distributed ledger networks, in the trading and settlement of digital securities, excluding derivative contracts and “unbacked crypto assets” like bitcoin and ether.

FCA Executive Director Sheldon Mills emphasized the transformative potential of the DSS, stating, “The new Digital Securities Sandbox reshapes how we regulate by allowing firms to test regulatory changes using real-world situations before these changes are made permanent.” Mills added, “The new sandbox also helps strengthen the U.K.’s leading position as a global and vibrant financial center, by driving adoption of new technologies for trading and settling traditional assets.”

It’s crucial to note that the DSS differs from the Digital Sandbox, launched by the FCA in August 2023, which supports firms in the nascent stages of digital product development.

Timeline and Implementation

The UK Treasury initially proposed the DSS in July 2023, followed by the government’s response to the consultation and plans to enact legislation to implement the initiative in November. Subsequently, the government introduced new regulations in December, providing supervisory guidelines for the sandbox under the Financial Services and Markets Act 2023, which took effect on January 8.

Following the release of the joint consultation paper, interested parties have until May 29 to provide feedback. Subsequently, the BoE and FCA will issue a response and begin accepting applications for the DSS, scheduled for the summer of 2024. The regulators anticipate that the first cohort of DSS participants will join the initiative as early as autumn.

BoE Executive Director for Financial Market Infrastructure, Sasha Mills, emphasized the importance of the Digital Securities Sandbox, highlighting its role as a crucial tool for regulators to understand how to adapt safely to technological advancements and changes in critical financial market processes such as securities settlement. Mills also expressed a warm welcome to input from potential participants and expressed anticipation for collaboration with the FCA, government, and industry throughout the DSS.

Successful applicants will have the opportunity to offer securities depository and settlement services and operate a trading venue under a single legal entity. The DSS aims to encompass a diverse range of firms to maximize learning opportunities and foster innovation within the UK financial system. This endeavor could pave the way for expedited and cost-effective trading, settlement, and utilization of securities among financial market participants. The initiative is slated to run for five years, contingent upon entry limits, and could culminate in permanent regulations governing the trading and settlement of digital assets.

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The stablecoin supply within the layer-1 blockchain network Solana has experienced a steady rise since the start of the year, surpassing the $3 billion milestone in recent days.

Data sourced from the blockchain analytics platform Artemis reveals a 55.72% increase in stablecoin supply over the last three months, now totaling $3.12 billion on the network.

While this figure is notably lower than the balance recorded in 2022, when over $6 billion worth of assets were present on the blockchain, it marks a significant recovery from the low point of $1.4 billion during the bear market. The recent upward trend signals a resurgence in activity.

Moreover, stablecoin transfer volume on Solana has surged by an impressive 164%, reaching $1.4 trillion, underscoring the network’s robust activity levels.

USDC Dominance

A breakdown of stablecoins on Solana highlights the dominance of Circle’s USD Coin (USDC), which accounts for 73% of such assets on the network.

Recent data from Artemis shows USDC’s substantial share of stablecoin transfer volume, amounting to $63.69 billion on April 2, overshadowing USDT’s $812.41 million. EURC ranks third with a volume of less than $100,000.

The rise of USDC’s dominance on Solana correlates with Circle’s introduction of its Cross-Chain Transfer Protocol (CCTP) on the network on March 26.

Reasons Behind Solana’s Stablecoin Surge

Stablecoins serve as a vital bridge between traditional fiat currencies and digital assets. The increasing stablecoin supply indicates heightened liquidity and suggests a rise in capital inflow.

Market analysts attribute this surge to the influx of capital into the network, coinciding with the hype surrounding meme coins and the expanding DeFi activity within the Solana ecosystem.

Despite past controversies involving Sam Bankman-Fried, the founder of FTX, the Solana blockchain ecosystem has witnessed significant growth over the past year. This growth has attracted a wave of new users and forged substantial partnerships with major global financial entities like Visa and Shopify.

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Coinbase has joined the ranks of prominent cryptocurrency trading platforms like Binance by integrating the Bitcoin Lightning Network, fulfilling promises made by CEO Brian Armstrong.

In a statement released on April 3rd, Lightspark, a lightning network-based payment infrastructure provider, announced its selection by Coinbase to facilitate the integration of the Bitcoin Lightning Network.

Through this partnership, Coinbase will utilize Lightspark’s remote-key signing implementation. This setup enables Coinbase to maintain control of the Lightning signing keys while Lightspark manages the Lightning node infrastructure. This collaborative approach ensures smooth operations without overwhelming Coinbase’s team with the management of a large-scale implementation.

Lightspark has garnered significant success in simplifying Lightning node management. Its suite of products, including SDKs, APIs, and developer tools, seamlessly integrates with the Lightning Network. Moreover, Lightspark’s AI-based smart engine, known as Lightspark Predict, dynamically optimizes liquidity needs to improve transaction success rates in real time.

Benefits of Lightning Integration

The integration provides several advantages for Coinbase, including leveraging Lightspark’s node infrastructure while allowing its team to concentrate on customer-centric initiatives.

Furthermore, the collaboration will positively impact the Bitcoin network, particularly during periods of increased transaction fees, by improving scalability and transaction efficiency. Furthermore, it sets the foundation for future applications by supplying liquidity to the Bitcoin network.

Shan Aggarwal, Coinbase’s VP of Corporate & Business Development, conveyed excitement regarding the partnership, expressing the company’s eagerness to collaborate with Lightspark to remove payment barriers and facilitate faster and more cost-effective Bitcoin transactions by supporting the Bitcoin Lightning Network.

Recently, Coinbase has faced mounting inquiries from various crypto community members regarding its delay in adopting the scaling solution, especially following the integration of the technology by major competitors like Binance.

In response, Armstrong reaffirmed Coinbase’s commitment to incorporating the Lightning Network, highlighting the company’s ongoing efforts.

This integration holds significance for Bitcoin, considering the growing demand for streamlined Bitcoin transactions amidst soaring prices.

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The Monetary Authority of Singapore (MAS) is broadening its regulatory framework for crypto service providers through amendments to the Payment Services Act, aiming to enhance user protection and safeguard financial stability.

Announced on Tuesday, the amendments will be implemented in stages, starting from April 4. The MAS emphasized that these changes will encompass custodial services for digital payment tokens (DPTs), facilitation of DPT transmission, and cross-border money transfers, even in cases where funds are not received in Singapore.

Under the amended regulations, the MAS will have the authority to impose requirements related to anti-money laundering (AML), countering the financing of terrorism (CFT), user protection, and financial stability on DPT service providers.

Transitional arrangements will be provided for entities affected by the expanded regulatory scope. However, affected entities must notify the regulator within 30 days and submit a license application within six months from April 4.

According to Angela Ang, a senior policy advisor at blockchain intelligence firm TRM Labs and former MAS regulator, this expansion brings long-awaited regulatory clarity to crypto custody players in Singapore.

Kelvin Low, a law professor at the National University of Singapore, remarked that these changes were anticipated and unlikely to surprise industry players. He suggested that any decisions by crypto exchanges or firms to exit Singapore due to these changes would have been made well in advance.

In addition to regulatory amendments, the MAS released guidelines outlining consumer protection measures that DPT service providers must adhere to under the Payment Services Act. These measures include segregating customer assets, maintaining proper books and records, and ensuring the security and integrity of customer assets. The guideline is slated to come into effect on October 4.

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Crypto.com is set to introduce its digital asset trading services in South Korea by the end of this month, as announced on Tuesday. This move comes as part of Crypto.com’s acquisition of local exchange OK-BIT in 2022.

The forthcoming platform from Crypto.com will replace the operations of OK-BIT, which is gradually winding down its services. Eric Anziani, President and COO of Crypto.com, expressed excitement about entering the South Korean market, emphasizing its significance for the company’s growth and the keen interest of South Korean consumers in crypto.

The South Korean trading platform Crypto.com will adhere to strict regulations set by local authorities for crypto exchanges. Operating under the name Crypto.com App, the platform will enable South Korean retail investors to engage in cryptocurrency and non-fungible token (NFT) trading. However, institutional clients will not be served, as South Korean-based institutions are restricted from direct crypto investments.

Furthermore, South Korea mandates that local crypto exchanges establish banking partnerships to offer fiat-to-crypto trading services, aiming to mitigate risks related to money laundering and market manipulation. While Crypto.com’s initial services will focus on crypto-to-crypto exchange, the company aims to secure a local bank partnership to provide a comprehensive trading experience, according to South Korean news agency News1.

In a parallel development, Binance made its entry into the South Korean market last year by acquiring a majority stake in local exchange Gopax. However, regulatory concerns surrounding Binance’s legal issues in the U.S. have led to delays in approving structural changes to Gopax. Binance has been actively seeking to address compliance issues by reducing its shares in Gopax and engaging in discussions with financial regulators in South Korea.

South Korea boasts one of the world’s largest and most active cryptocurrency markets, with its five fully licensed exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax—processing nearly $3 billion worth of crypto transactions in the past 24 hours, according to CoinGecko data. During the peak of Bitcoin’s price surge earlier this year, South Korea’s crypto trade volume briefly surpassed that of its stock market.

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