U.K. Chancellor Rishi Sunak unveiled plans for the creation of a "scale box" to support growing financial technology companies, and a new sandbox specifically for companies using distributed ledger technology, or DLT, during a speech at U.K. Fintech Week on April 19.
The scale box plan takes forward a recommendation from the Kalifa Review of U.K. Fintech, an influential independent review published in February. The review argued that while the U.K. has been successful in launching new fintechs and attracting global investment into the sector, it still needs to prove itself as a location for scaling up young companies. The scale box is an extension of the U.K.'s popular fintech sandbox program, which allows fintech companies to test out new ideas and business models that are not fully covered by existing regulations.
The U.K.'s Financial Conduct Authority, or FCA, launched its first sandbox in 2016, and the model has been copied by numerous other countries.
The DLT sandbox is targeted at fintechs that are developing solutions to improve financial market infrastructure. In addition to the scale box and the DLT sandbox, the FCA will launch a new phase of the existing digital sandbox that will allow fintechs to test out concepts relating to sustainability and fighting climate change.
The U.K. is also working on "reforming the visa system" to make it easier for fintechs to hire international staff, Sunak said during the event. This also takes forward a recommendation from the Kalifa Review, which suggested that the U.K. needed a more hospitable visa environment for tech workers in order to retain its status as a global center for fintech.
"Our vision is for a more open, greener, and more technologically advanced financial services sector," Sunak said. "The U.K. is already known for being at the forefront of innovation, but we need to go further."
The government has "set out its stall" for the fintech sector via Sunak's announcement, Simon Treacy, senior lawyer at Linklaters, said in a statement.
"The creation of new regulatory sandboxes is specifically targeted at bridging the gap between fintech start-ups and global champions," he said. "This idea was put forward by the Kalifa Review but at this stage it is not clear what the scale box would look like in practice and what the criteria might be for participating in it."
Catherine McGuinness, policy chair of City of London Corp., also welcomed the announcement, saying, "We are particularly pleased that many of the recommendations made in the Kalifa Review will now be taken forward."
Sunak's comments came the same day that the The Bank of England and HM Treasury announced the creation of a task force to look into the possibility of creating a central bank digital currency, or CBDC, for the U.K. The task force will look into possible use cases for CBDCs, as well as monitoring CBDC developments in other countries.