FCA unveils proposals for a global sandbox network

Regulators around the world have used sandboxes in their markets to test innovative regulated products. But some fintech products could benefit more from cross-border testing. Regulators have built on the idea of a global sandbox and are now consulting on a Global Financial Innovation Network.

What would the new network do?

The consultation proposes that the Global Financial Innovation Network should go beyond the original concept of a global sandbox and boost innovation in fintech by creating a forum for more efficient interactions between fintech companies and regulatory authorities in different countries.

The three main functions of the network would be:

1. Network of regulators: To share experiences of innovation trends in different markets, local tests and initiatives between an international community of regulators

2. Joint policy work and regulatory trials: To collaborate on key policy questions to inform regulatory approach and, perhaps, collaborate on regtech solutions (like the FCA’s May 2018 financial crime techsprint)

3. Cross-border trials: To provide firms with an environment in which to trial cross-border fintech products with temporary regulatory authorisation (i.e. the global sandbox).

The new network is intended to “help share the experiences and knowledge from across different markets, while also providing a platform for innovative firms wishing to scale their propositions via testing in multiple countries
Christopher Woolard, FCA Executive Director of Strategy and Competition.
Who will participate in the network?
The network currently comprises 11 organisations. These include financial services regulators from Abu Dhabi, Australia, Canada, Dubai, Hong Kong, Singapore, the UK and the US.

These original members have committed to exploring the idea of the network. However, according to the FCA, the consultation process will inform whether they decide to remain involved. Regulators may choose the level of their engagement (e.g. some may participate in the network and joint policy work but not the global sandbox).

How would the global sandbox work?
The FCA originally suggested the idea of a joint sandbox programme in February 2018. It proposed allowing firms to conduct tests in different jurisdictions at the same time to solve multi-jurisdictional regulatory issues.

The consultation indicates how these cross-border trials could work:
 
  • The first trials may be limited to certain topics and jurisdictions
  • Criteria for entry would be published, tailored by participating jurisdiction
  • It has not been decided whether applications would be accepted on a rolling basis or (like the UK sandbox) in cohorts
  • The chair of the network would normally coordinate applications
  • Firms should demonstrate they can operate in multiple jurisdictions for the duration of the trial
  • The relevant regulators would decide on the merits of the trial
  • Successful firms would be asked to submit a trial plan before testing began
  • The results of the trial should give firms information about the merits of the product and how it benefits consumers or the market
What happens next?

The consultation ends on 14 October 2018. A working group will then assess the feedback and agree next steps in the autumn. This would include agreeing a timeline for when the network would be launched.

The consultation notes that there is a wider group of stakeholders who expressed an interest in the network and invites participation from other regulators.