This post is the first of a series dedicated to the Regulatory Sandbox. Its importance lies in the recent approval of the Draft Bill for Digital Transformation of the Financial System by the Spanish Council of Ministers on 18 February 2020.
Our knowledge of Innovative business models, and its regulation is key to deliver an end-to-end service to our clients. In this post we will talk about SANDBOX: What it is, when it started, where we are, and what the next steps are
What is a regulatory Sandbox? What is its purpose?
Regulatory Sandbox is understood as a controlled environment that allows businesses to test innovative and technology propositions in the market, with real consumers and individual guidance. The main objective of those technology companies is to be able to operate in the market legally by obtaining an authorization or license.
Regulatory Sandbox is seen as a solution to adapt the regulation in line with the accelerated pace at which innovation projects are made. It seeks to provide Supervisory Authorities with the control and information of new business models that require the applicability of the principle of proportionality.
But has it already been approved? Where are we now?
In 2018, the Ministry of Economy, aware of the need to apply the principle of proportionality to technological projects with enormous potential but with a restrictive regulatory burden, began working with the entire financial and technological industry to enact a law to create a FinTech Sandbox. It is the “Digital Transformation of the Financial System” law, which is an international reference for its flexibility and ambition. This draft law was passed on first reading by the Council of Ministers on 22 February 2019 and passed on second reading on 18 February 2020.
The approval of the draft law “Digital Transformation of the Financial System” is only pending Parliament ratification for the final green light. It has already been made public that the Treasury will count with a team of 8 people, with specific skills and trained in the matter. Once Regulatory Sandbox is definitely approved, the Treasury will be open to receive projects that want to be part of it within the period of one month.
This being said, the innovation projects that are intended to be part of the Spanish Sandbox must be prepared in advance to ensure their entry and viability.
Has it already been approved in other countries?
A total of 27 countries have decided to implement regulatory sandboxes in their legal system. The bulk of this type of initiative is in Asia (52%), where 14 countries already have a regulatory sandbox. The most prominent are Singapore, Hong Kong and Malaysia. It is followed by Europe (22%), where 6 countries already have a sandbox in place, among which Denmark, the Netherlands and the United Kingdom stand out for their influence.
On the other hand, in America (15%) there are up to 4 different jurisdictions that have implemented this type of initiative. Africa (7%) has two countries with a regulatory sandbox and Oceania (4%) has one, Australia.