The Financial Conduct Authority (FCA), a financial regulatory body in the UK, is considering approving firms using bitcoin’s underlying blockchain technology.

Speaking with Financial Times, the financial watchdog said that a number of groups in its preapproval stage are engaged in the development of blockchain-based consumer-facing and compliance products.

“We do think [blockchain] has got some potentially interesting applications and we are talking to firms thinking about how to apply that to financial services and how it could benefit consumers or indeed make the business of compliance easier,” Chris Woolard, the FCA’s director of strategy and competition, told the Financial Times. “There may be areas where we might want to encourage it a bit.”

According to FT, the companies are being assessed as part of the FCA’s Project Innovate. Launched in October 2014, Project Innovate seeks to provide direct support to innovative firms and also focuses on policy and process improvement. It includes a “regulatory sandbox” that allows businesses to test out new, innovative financial services without incurring all the normal regulatory consequences of engaging in those activities.

Woolard said that a “small but significant number” of companies developing blockchain technology are part of the project. He added that more details will be announced in the coming the coming months.

According to an EY report, commissioned by the HM Treasury, the UK has the strongest FinTech policy environment, with the most supportive regulatory regime. It said that the strength of the UK policy environment is due to the supportiveness and accessibility of the FCA, effective tax incentives and numerous government programmes designed to promote competition and innovation which indirectly support FinTechs.

In a meeting held by the Economic Affairs Committee of the House of Lords (Parliament's upper house) in July, Bank of England Deputy Governor Ben Broadbent expressed his optimism on blockchain technology and its application in the banking system. He said that “the benefits [of blockchain technology] are clear and quite large, and so are the costs.”

Also, earlier this month, blockchain platform provider Credits announced that it now supplying its secure Blockchain-as-a-Service to the UK public sector through the Government Digital Services' Digital Marketplace.