The Edinburgh-based investment manager worked with the regulator on the development of a tokenised UK fund, Baillie Giffords Enhanced Yield fund, using the FCA’s regulatory sandbox to test the technology and the proposed service.

The FCA believes its new approach has allowed it to help established and new financial firms innovate products to market more quickly as he claimed it helped the UK takeover the US in adopting digital technologies.

BAGEY is available to professional investors in the UK, Hong Kong, Switzerland and the Cayman Islands.

Speaking at Barclays’ Glasgow office on “Reimagining banking for the intelligent age”, as part of FinTech Scotland’s festival, he told attendees: “They approached us nine months before they launched. A new product, new service, new partnerships, new sector.”

The project involved Baillie Gifford working with Bank of New York on a tokenised fund, with the FCA using its sandbox to examine the technology before the product went through the wider regulatory process.

“We put it into our sandbox, we tested it,” the FCA executive said. “We were very comfortable with the technologies involved. They’re authorised in nine months. This is unprecedented. I would challenge almost any other regulator around the world doing that speed. I often get told about Singapore being fast or Dubai being fast. We’re fast.”

Mr Payne highlighted that the Scottish asset manager was a 114-year-old company experimenting with technology that could change how investment products are created and distributed.

He said the project demonstrated how the regulator’s sandbox could allow established financial institutions to test new ideas while giving the FCA’s authorisation, supervision and policy teams early sight of the technology.

The FCA’s innovation panel brings together officials from across the organisation, including authorisation, supervision, enforcement and economics. The executive described the process as deliberately challenging.

“We’ve done the due diligence one. We’ve tested the tech. We’ve got the data. We lay it front of them because we know the language, so we can do what perhaps others can’t do, which is lay it in front of our colleagues for challenge. And, boy, do they challenge?”

He revealed that the scrutiny meant that once the project had progressed through the process, it was able to go to the board and answer the questions raised by members of the FCA, noting the firm could move forward with greater confidence.

He added: “They’ve got all of us on board with them. They’re feeling good. They’ll support it. That’s what we want to do with all AI projects in the future as well,” he said. “Speed them up, get them out there, get them qualified, get them working.”

The FCA sees the sandbox not simply as a mechanism for checking compliance, but as a way of bringing regulators and industry together earlier in the development process.

The Baillie Gifford project is therefore being presented as an example of the model the regulator wants to expand: test new technology early, expose it to rigorous regulatory scrutiny and, where the risks can be managed, help firms bring the resulting product to market.

He added: “I think we can be very, very proud of that. I’m proud that it’s a Scottish firm. It’s 114 years old. It’s not a young fintech. This is a firm, that’s incumbent, in the most traditional sense. Working with an American firm, but it’s come through our sandbox to allow it to do some really great work. 

“I’m talking about how do we make this happen in reality? And my open invitation is to get involved in what we’re doing because we need your help. We need your help to make the UK the best place to do this kind of business.”