In recent years, there has been a trend among financial regulators in jurisdictions around the world, including in Australia, Malaysia, Singapore, the UAE and the UK, to allow technology firms to operate business within the scope of a “regulatory sandbox”. A regulatory sandbox refers to a predefined scope of restrictions within which a technology firm may operate exempt from some or all of the regulations that would normally be applicable, in order to test new products, services or business models that depend on innovative technology.
In a regulatory sandbox, business is conducted under direct supervision of the regulator. In order to limit risk to the general public, a participant may only offer its products or services to a limited group of consumers within a limited period of time, and under specific conditions.
Generally, financial regulators establish regulatory sandboxes because its regulations are not able to keep pace with the speed of developments in the field of financial technology (fintech), the difficulty for businesses to follow the complex web of rules and regulations, and because certain fintech products or services tend to contain components that are regulated as well as those that are not. Therefore, regulatory sandboxes offer a means for regulators to monitor and study new developments, as well as to devise new regulations on an ad hoc basis just as new innovations are being introduced to the market.
Jason Corbett is the managing partner at Silk Legal in Bangkok
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