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Sep 6, 2019

FINSUM: Regulatory Sandbox Summit

FINSUM: Regulatory Sandbox Summit

During FINSUM, Nikkei hosted a discussion on regulatory sandboxes, with participation from Nick Cook, Director of Innovation, Financial Conduct Authority (FCA); Nelson Chow, Chief Fintech Officer, Hong Kong Monetary Authority (HKMA); and Rebecca Martin, Senior Executive Officer, Monetary Authority of Singapore (MAS).


  • Started the regulatory sandbox program in 2016
  • It is available for both regulated and unregulated entities
  • It provides exposure to real-world consumers
  • To be eligible for the sandbox, some sort of regulatory support from the FCA must be required, for example in the form of a restricted authorization or license
  • The program is run with two cohorts per year, the maximum time in the sandbox therefore is six months
  • There need to be safeguards against consumer harm, for example by limiting the number of customers, or by setting aside funds for redress; the FCA also reserves the right to terminate the test at any point (although to date, they did not have to do that)
  • Whether the “experiment” is disclosed to the market or not is negotiable as such disclosure might invalidate the sandbox approach
  • To date, there have been 400 applications, of which 120 have been accepted, with very varied participants
  • The Global Financial Innovation Network (GFIN), a group of about 40 regulators and associated entities, aims to create a global regulatory sandbox; one focus area here is the evolution of RegTech/SupTech (Supervisory Technology) that can be applied across markets



  • Started the regulatory sandbox program in 2016
  • To date, 62 banks and partner firms have conducted 70 trials, 34 of which have been completed and went live
  • Participants stay in the sandbox typically for three to six months, and the number of customers or customer transactions during that period is negotiable
  • Sees an important aspect of the sandbox as giving the regulators the opportunity to understand how the latest technology works
  • It was intended as a signal that the HKMA supports innovation
  • In 2017, “Version 2.0” of the regulatory sandbox was released, including a chat room (300+ participants now), allowing tech firms access (previously only banks), and creating a single point of entry for a cross-sector sandbox (given that the HKMA is only one of several financial services sector regulators)
  • GFIN had their inaugural meeting in Hong Kong in 2018, and to date there have been three cases of participation in the HK sandbox that originated in other jurisdictions: Ascent, Starling, and Onfido
  • Sees SupTech as an area of great promise, although there is not much harmonization of regulation across jurisdictions just yet


  • Started the regulatory sandbox program in 2016
  • In 2019, “MAS Express” was launched to accommodate low risk initiatives
  • For most of her presentation, the MAS focused on the Asian Financial Innovation Network (AFIN), and APIX as an open innovation platform across ASEAN, which we have covered in a previous article


  • For comparison, in Japan the concept of the regulatory sandbox is not industry specific, but anchored under the cabinet office
  • Conceptually, this allows for pan-industry innovation, and FinTech and other initiatives, for example self-driving cars (self-driving banks?), are covered under the same regulation
  • Where required, after the sandbox demonstration, regulatory reform measures can be contemplated and implemented
  • The sandbox is available to domestic and foreign companies

Common Challenges

  • The readiness to test of participants has been identified as the most common challenge across the participating regulators; B2C (Business-to-Consumer) is easy to implement, but the need for partner institutions in B2B (Business-to-Business), which would likely be incumbents, presents an obstacle
  • Since the interest in sandbox participating has grown significantly, it is a challenge to keep up with staffing on the regulator side
  • There need to be informed decisions about what is “innovation” and what is “innovative”; also, the regulator cannot pick winners, so often 2–3 companies with fairly similar business models are initially allowed into the sandbox; once that specific business model has been tested, typically further applicants would be denied
  • Regulators across the regions focus on making international testing through GFIN work

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