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FCA Sandbox Cohort 4

What has happened?

The FCA announced on 3rd July 2018 the 29 firms that were successful in their applications to begin testing in the fourth cohort of the regulatory sandbox. Christopher Woolard, executive 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 cryptoassets which will help inform our policy work and propositions aimed at helping lower income consumers.”

The FCA received 69 applications to cohort four of the regulatory sandbox, an increase on the number of applications to cohort three. 29 firms will proceed to test. As with the previous cohorts, the FCA continues to see successful applications from a diverse range of sectors, locations and firm sizes. Areas covered include consumer credit, automated advice and travel insurance.

Eight firms (27%) are operating in the wholesale sector. This is a large increase on cohort 3, where the FCA had three firms with wholesale propositions. Five large firm tests will be conducted in cohort 4, the largest number to date.

Over 40% of companies accepted to cohort four are using DLT. Of these, six are using DLT to automate the issuance of debt or equity. Two are using DLT to support the provision of insurance. Other technology applied includes geo-location technology, the use of Application Programming Interfaces (APIs) and artificial intelligence.

The FCA has accepted a small number of firms that will be testing propositions relating to cryptoassets, and is keen to explore whether, in a controlled environment, consumer benefits can be delivered while effectively managing the associated risks.Tests will be conducted on a short-term and small-scale basis and the FCA has worked with the sandbox firms to agree testing parameters and build in robust consumer safeguards.

General information about the sandbox is available here.

How Thistle can help you

Thistle will continue to keep the sandbox programme under review and will issue further updates where necessary. Please contact Thistle if you need assistance in relation to any of these issues.