Regulatory Sandbox

Regulatory Sandbox

We exist to…

Provide a space for safe experimentation

Innovation means pushing boundaries. The Regulatory Sandbox provides market innovators with an opportunity to test new products and services that push the boundaries of existing regulation, all under the responsible supervision of relevant regulators.
Market innovators must apply to the Regulatory Sandbox. Accepted participants test their product or service within parameters established by the IFWG and are expected to report on testing progress at regular intervals. Learnings from testing will help regulators determine if and how policies and regulations must change to promote responsible innovation in the market.

Should you apply to the Regulatory Sandbox?

In order to be eligible for the Regulatory Sandbox, the following initial criteria must be met:
  • The innovation to be tested must be intended for deployment in the South African market
  • The innovation to be tested must not clearly fit within the existing regulatory framework or it challenges the existing regulatory framework
  • The innovation must be beneficial to consumers or the market at-large (e.g., for Business-to-Consumer companies – lower prices, increased competition, improved access/financial inclusion; for Business-to-Business companies – lower costs, increased efficiency, improved compliance)
  • The innovation must be significantly different from other offerings in the market
  • The innovation must be ready to be tested, including fully developed technology, sufficient funding to cover the full testing period, and secured partnerships (if required for testing)

IFWG Regulatory Sandbox – First cohort​

The Intergovernmental Fintech Working Group received a total of 52 applications during the application window for the Regulatory Sandbox which closed on 15 May 2020. The 52 applications received represented a broad range of financial services activities of which 34 were related to payments, 7 savings and deposits, 5 lending, 3 investments, and the remaining 3 identified as “other”.

The IFWG is extremely pleased with the large number of applications as it is a testimony to the vibrancy and dynamism in the South African fintech landscape. The approval process between the multiple regulators has taken us longer than expected. This was largely driven by the need to clarify treatment of these complex cases which do not currently fit neatly within regulation. As a result, we have adopted a staggered approach to allow the innovators who are ready to start testing to proceed before the full cohort is finalised. The table below reflects the innovators who are currently testing. Once the cohort approval process is finalised, the final list of innovators accepted into the Regulatory Sandbox will be communicated publicly through an IFWG press release.

The IFWG reiterates that entrance into the sandbox does not indicate a change in a firm’s licensing status or signal tacit or implicit approval of the product or service under consideration. It does, however, offer both the regulators and the innovators an opportunity to consider the 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.

In most cases testing is expected to last 6 months and the innovators have worked with the various regulators to determine appropriate testing parameters, consumer protection measures and continued compliance with all regulatory requirements during the testing period. Dates for the next intake’s application window will be communicated closer to the end of cohort 1.

Innovators currently testing as part of cohort 1

Innovator
Innovator’s core business
What is in the sandbox
The People’s Fund
Crowd-investing platform that facilitates raising capital for Small and Medium-sized Enterprises (SMEs) with consumers willing to invest. The investments are used to fund SMEs’ purchase orders, products or assets.
The sandbox seeks to clarify the treatment and appropriate framework for the intermediation of crowd-investing platforms.
The Standard Bank of South Africa Limited
Standard Bank is a financial institution that offers banking and financial services to individuals, businesses, institutions and corporations in Africa and abroad.
The scope of testing is limited to the reporting of cross-border foreign exchange transactions submitted to the Financial Surveillance Department of the South African Bank utilising a blockchain platform, and verifying that the reporting is timely and in compliance with all relevant reporting rules, as prescribed in the Business and Technical Specifications. The reporting tested will happen in parallel to existing reporting process and clients would not be impacted.
Investec Bank Limited (Investec)
Investec provides Specialist Banking and Wealth and Investment services to individuals, businesses and intermediaries.
Investec is testing a safe custody service for crypto assets through its innovative Digital Asset Vault offering. This is a secure mechanism for Investec clients to store and transfer crypto assets, reducing reliance on cold storage i.e. complex hardware wallets and/or crypto asset exchanges. The objective of testing the Digital Asset Vault in the Sandbox is primarily to test Investec’s regulatory compliance, regulatory reporting processes, and related risk management frameworks in collaboration with the IFWG.
Xago Technologies (Xago)
Cross-border remittances
Testing the regulatory treatment of crypto assets (specifically Ripple (XRP)) in terms of the South African Exchange Control Regulations 1961, promulgated in terms of section 9 of the Currency and Exchanges Act, 1933 (Act No. 9 of 1933), used for effecting cross-border transactions between South Africa and the United Kingdom, and the United Kingdom and South Africa, subject to certain limits prescribed by the relevant authorities, and reporting on such transaction to the relevant authorities.
Mercury FX (Mercury)
International payments
Mercury is testing the regulatory treatment, and associated regulatory reporting implications and obligations, of crypto assets (specifically XRP) being used for effecting low-value cross-border remittances between South Africa and the United Kingdom and vice versa, subject to certain limits prescribed by the relevant authorities. Testing will in the main be done in terms of the South African Exchange Control Regulations 1961, promulgated in terms of section 9 of the Currency and Exchanges Act, 1933 (Act No. 9 of 1933).
Centbee
Innovating digital payments
Centbee is testing the regulatory treatment of crypto assets (specifically Bitcoin (BTC) and Bitcoin Satoshi Vision (BSV)) for low-value cross-border remittances between South Africa and Ghana and vice versa
Santam
Santam offers general insurance products and services in Southern Africa and internationally.
Sandbox testing will seek to clarify the treatment and appropriate regulatory framework for Index Insurance as an insurance product. This will be done by conducting tests on Santam’s Soil Moisture Index product offering.
Still have questions on the Regulatory Sandbox? Download our FAQs here.