Regulators Plan a “Global Sandbox” for Fintech

Daily Fintech, Ilias Louis Hatzis | Aug. 13, 2018


Daily Fintech
’s Ilias Louis Hatzis wrote:

Story: Regulators Plan ‘Global Sandbox’ for Fintech Including Blockchain

Decrypted: Financial regulators from countries around the world have collaborated to form Global Financial Innovation Network (GFIN), a new network to help further the development of financial technologies like blockchain.

The UK’s FCA announced that its collaborating with 11 regulatory bodies from Europe, the Far East and the United States, to create a cross-jurisdictional fintech sandbox, that will let businesses test fintech innovations in multiple jurisdictions at the same time.

Our take: When the term “sandbox” is used in the area of software development, it refers to an isolated but fully functional testing environment where applications can be tested before going live.

In the same suit, a crypto regulatory sandbox is a live-like testing environment used to ensure regulatory compliance for cryptocurrencies and blockchain platforms. The idea of a crypto regulatory sandbox, addresses the friction between innovation and regulation and benefits the end consumer.

While the UK Financial Conduct Authority is one of the first regulators in the world to establish a regulatory sandbox, the U.S. has been trailing in providing a launching ground for new fintech startups.

Recently in the US. the Consumer Financial Protection Bureau (CFPB) launched a fintech regulatory sandbox, according to report from the Wall Street Journal. Individual states are also employing the concept. Arizona became the first state to adopt a regulatory sandbox in March, and Illinois lawmakers have been considering legislation to establish a similar framework.

As the fintech sector is thriving with new, innovative products, the ability for service providers to conduct cross-border trials, is be a huge step in bringing new solutions to the global market.

Because financial services involve monetary transactions like lending, payments, insurance and trading, regulatory compliance is a must, and fintech businesses need to confirm to regulations and ensure consumer protection. Sandboxes like the FCA’s initiative, allow businesses to test products, services, business models and delivery mechanisms, in a controlled environment, before actually deploying. Moreover, a crypto regulatory sandbox bridges the gap between regulators and financial service providers, helping create a more open and active dialogue.

The Monetary Authority of Singapore (MAS) published the following infographic about their Regulatory Sandbox process: