Accelerating Success in the Digital Securities Sandbox with RegDefy
The Bank of England have launched the Digital Securities Sandbox (DSS), a groundbreaking initiative designed to support innovative fintech startups in their journey from an idea to a fully regulated component of the UK’s financial services landscape. This should minimise the risk of “on ramping” these nascent businesses into the UK economy. The DSS journey has four gates that startups need to pass through before conducting large-scale, steady state, and regulated operations. In this blog post, we will explore how RegDefy, a SaaS and methodology, can help you navigate these gates more efficiently, ultimately accelerating you on your path to business viability through higher volumes and values.
A Structured Approach to Regulatory Compliance
The DSS’s incremental approval process requires startups to demonstrate their understanding of the ecosystem, operational processes, risks, and compliance with relevant regulations at each gate. Traditionally, this involves creating and managing complex spreadsheets, which can become unwieldy, error-prone, and fragile. RegDefy offers a predefined and battle tested structure to capture data across all areas of the DSS qualification gates, replacing the need for cumbersome spreadsheets and streamlining the process.
How can the data structure be battle tested when the DSS has just been launched? RegDefy was built alongside Fnality’s journey to be the global first regulated DLT based payment system, regulated by the Bank of England. While Fnality is not in the DSS, the criteria and the journey so far look very similar.
Facilitating Gate Progression with RegDefy
The journey through the DSS gates requires a succession of submissions so the Bank and the FCA are able to understand your ecosystem at an ever-greater level of detail. As an example, what may start off as 50 significant Capabilities with three or four services from immediate suppliers may morph into several hundred processes and ten fully elaborated Important Business Services across the whole supply chain. Understanding how, at any specific moment, these activities relate to regulations and policies; what has changed since the last submission; and what can be deleted as they are old is essential.
The first gate in the DSS involves submitting an initial application. This application, while high level sets the initial organisations and the services that will be offered to customers. RegDefy supports this stage by helping you present a comprehensive overview of your business and ecosystem to regulators.
Bank of England Gate Progression
Gate 2: Building a Solid Foundation
After your initial application is approved, the target is Gate 2 which is approval to go live with limits. To get through Gate 2 you will need to balance demonstrating that the ecosystem is well staffed and run with building a business on a path to viability. The short answer here is to do this as quickly as possible and pass first time. For the former you’ll need to provide a detailed articulation of your business ecosystem and operations. RegDefy helps you achieve this by enabling you to:
- Explain your ecosystem: MiClearly outline your business model and operations, so regulators have a comprehensive understanding of your project.
- Describe your operational processes: Develop a process and capability catalogue mapping to the Gate 2 rules.
- Identify and manage risks: Assess the risks within your ecosystem and potential spillover risks to the wider economy, as outlined in Article 45 of the Gate 2 rules.
- Demonstrate regulatory compliance: Show how you adhere to relevant regulations, such as operational resilience and the operation of Important Business Services (IBS).
Gate 3 and Beyond: Dynamic Model and Continuous Improvement
Once you’ve gone live with your operations, RegDefy assists you in managing and refining your dynamic operational model. This involves capturing real-time data, such as evidence of process execution and Key Risk Indicator (KRI) measurements. As you gain experience and encounter real-world events, RegDefy helps you update your static model, implement new risk controls, and develop new products or services based on market feedback.
Although the criteria for Gates 3 and 4 are not yet published, it is likely that a business will be judged on how well it complies with regulations, standards and most importantly its approved policies. Using RegDefy to demonstrate that the static model has evolved in a controlled way and the dynamic model has been faithfully completed will be obvious strengths. This is especially true with Gate 3 possibly having fixed dates to achieve it by.
RegDefy's mission is to accelerate the path to regulatory recognition and business viability for innovative, decentralised finance (DeFi) startups.
By providing a comprehensive and streamlined compliance tool and methodology, RegDefy empowers startups to efficiently navigate complex regulatory environments, minimise time to market, and focus on their core objectives.
Want to know more?
Navigating the Digital Securities Sandbox may well be be a complex and time-consuming process. RegDefy will accelerate your journey through the gates by providing a structured approach to managing your operations, risks, and compliance requirements.
By streamlining the regulatory process and fostering continuous improvement, RegDefy enables you to focus on what matters most – driving innovation and growth in the fintech space. Embrace the power of RegDefy and unlock the full potential of your DeFi startup today.
