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The regulatory sandbox (RSB) provides innovators in the financial sector with an opportunity to test their new products and services that push the boundaries of existing legislation and regulation responsibly, all under the supervision of relevant regulators.
The Intergovernmental Fintech Working Group (IFWG) RSB is a controlled environment that enables the testing of innovative products and services against regulation or legislation within predefined parameters and timeframes. The RSB first opened for applications during April 2020, following a cohort-based approach, that is, repeatedly opening the RSB for a period, allowing a new group of participants to test each time. The IFWG was pleased with the innovators' response to its initial sandboxing initiative, as documented in the public feedback report. At the same time, the IFWG went through a 'retrospective' review to consider how to improve on its approach and processes to serve both applicants and the regulators more effectively through the RSB. A key outcome from the review was that the RSB would move to an adjusted rolling-based approach - which means it would remain open for applications, with the regulators participating in the RSB indicating on the regulatory relief and focus areas page whether they will review applications on a case-by-case basis or whether they will be looking at specific themes, as well as their capacity to take on new applications at a particular point in time.
The applications on the IFWG website go through a stringent approval process. The RSB works with participating regulators to extend possible regulatory relief, where required, to approved regulated and unregulated innovators to test products and services which do not fit within, or challenges, the existing regulatory framework. Through a contracting process between the applicant and relevant regulator(s), an agreement is reached on what will be involved in a particular sandbox test, including a test plan, testing parameters (restrictions placed on testing to manage risks, including to customers), and the duration of testing (typically six months). Accepted participants must remain compliant with all existing regulatory requirements and entrance into the sandbox does not indicate a change in a firm's licensing status nor does it signal tacit or implicit approval. The RSB does not provide business support services, such as funding or business advice, nor any form of testing, such as testing the quality or security of code, other than testing against regulatory requirements.
Participants in the RSB are expected to report on testing progress at regular intervals, usually monthly. RSB testing offers both the regulators and the innovators an opportunity to consider the legislative and regulatory fit of emerging innovation. At the conclusion of testing, the insights gained should provide clarity on how such innovation could be treated from a regulatory perspective, in future, thereby promoting regulatory certainty. Details of an applicant's solution are not made public. However, where insights have broader market, policy or regulatory implications, such will be shared with industry.