FCA Chooses Blockchain Companies for Fourth Cohort of Regulatory Sandbox

The Financial Conduct Authority (FCA), responsible for conduct and relevant prudential regulation of financial services firms and financial markets in the U.K., has announced the details of the firms selected to be part of cohort 4 of its regulatory sandbox, according to an FCA post. Of the 29 firms selected, about 40 percent of them are blockchain focused.

The sandbox’s cohort 4 is a regulatory environment where firms can test innovative products, services or business models in a controlled environment with real customers. Businesses can test out their services with the aim of reducing costs of time-to-market while providing support in identifying “appropriate consumer protection safeguards” to be built into the products. This particular regulatory sandbox is a brainchild of Project Innovate, an initiative the FCA created in 2014 “to promote competition in the interest of consumers.”

Cohort 4

The FCA said it had selected 29 firms out of the 69 that applied to this most recent cohort’s regulatory sandbox. FCA Executive Director of Strategy and Competition Christopher Woolard spoke about the development which he says is “the largest sandbox cohort to date” as a “record number of applicants” met the eligibility criteria.

Of the 29 firms that have been selected for cohort 4, about a dozen of these companies use distributed ledger technology (DLT) for automating issuance of equity/debt, insurance provision and for the application of APIs; others offer services related to crypto assets.

20|30 is one of the companies accepted into cohort 4. It uses the Ethereum blockchain to help companies raise funds by issuing equity tokens. As part of the sandbox cohort, it will be able to test the issuance of equity tokens to investors using Nivaura’s integration with the London Stock Exchange Group (“LSEG”) Turquoise platform. The company seeks to demonstrate a “commercially viable model for tokenizing company equity” and to “establish equity tokens” as a means of raising capital.

“We are delighted to be included in the latest cohort of the FCA’s regulatory sandbox,” said 20|30 founder David Siegel. “This is a significant milestone for the 20|30 team. For the first time, our integration with the Turquoise platform will demonstrate a regulatory-compliant way for institutional investors to purchase equity tokens. We believe this is an important first step to building a new digital foundation for capital markets.”

Also selected by the FCA for sandbox testing, Globacap is a London-based, digital capital raising platform for SMEs and institutional investors which uses DLT to simplify and streamline the issuance process.

It seeks to bridge the gap between SMEs access to global capital while protecting the full rights of investors associated with equity and debt securities.

The company plans to run “an end-to-end capital raising on its own platform,” where it will also issue equity “as an ERC-compatible token, in its Digital Security Offering (DSO).” This trial will also “provide proof of concept” for the company’s new platform which offers SMEs a broader pool of global capital.

Co-founder of Globacap Myles Milston commented on the possibilities that abound for businesses raising capital in this way. He said, “The Innovate team at the FCA have been pivotal in this milestone, allowing us a quicker route to launch our proof of concept while having regulatory oversight.”

Other blockchain companies included in cohort 4 include BlockEx, Capexmove, Etherisc, Fineqia, Fractal, Natwest, TokenMarket, Tokencard, Universal Tokens and World Reserve Trust.