The FCA’s “global sandbox” is alive and kicking
The FCA-led Global Financial Innovation Network (GFIN) is now officially live, following its proposal last August. It aims to provide a more efficient way for innovative firms to interact with regulators as they look to scale globally - and it has hit the ground running with the launch of a pilot cross-border testing environment. It is also looking to create a framework for cooperation between regulators. Here’s our two-minute read.
In early 2018, the FCA proposed the idea of a “global sandbox” in its business plan. Building on that idea, it, together with 11 other regulators and supervisors, published a consultation paper setting out a proposal for the GFIN. The consultation paper received responses from 26 jurisdictions, following which the GFIN finalised its Terms of Reference and was officially launched on 31 January 2019.
Three primary functions
The GFIN’s Terms of Reference set out three primary functions:
- Regulator network: to act as a network of regulators to collaborate and share experience of innovation, including emerging technologies and business models, and to provide accessible regulatory contact information for firms.
- Joint RegTech: to provide a forum for joint RegTech work and collaborative knowledge-sharing/ lessons learnt.
- Cross-border testing: to provide firms with an environment in which to trial cross-border solutions. On this, it has already opened applications for a pilot phase of its cross-border testing scheme, closing 28 February.
A diverse and expanding network
The GFIN has now expanded well beyond its initial coordinating group of 12 to a network of some 29 national and international organisations, spanning five continents. It is currently chaired by the FCA, but that role goes up for a vote after a one-year term. The network’s membership comprises national and state regulators or supervisors. Non-regulator participants, such as the World Bank and IMF, have “observer” status. Not all members are required to support the cross-border testing environment - some will only participate in its knowledge sharing functions.
Interestingly, the GFIN currently has no representation in continental Europe – and, as we reported last month, the EU is considering its own separate network of national sandboxes and innovation hubs.
Some potential challenges
This global initiative has the potential to really streamline processes for fintechs looking to scale and there is much optimism about what it can achieve. However, with such an ambitious goal, it, and the fintechs dealing with it, are also likely to face certain challenges. For example:
- The GFIN has no powers to override national legislation, so companies will still need to comply with the letter of the law in each jurisdiction.
- Decision-making may be a slow process, given the diversity of membership and the fact that the network is endeavouring to reach consensus on all decisions.
- And, of course, the network is not (yet) completely global, so this leaves gaps in its offering.
Firms looking to participate in the cross-border testing pilot only have until 28 February to submit their applications. They will need to file separate applications to each regulator they would like to test with within this period.
It will certainly be interesting to see how it all plays out, beginning with this pilot phase. We will keep you posted.