Regulatory Sandbox

Regulatory Sandboxes

A regulatory sandbox is a controlled environment or framework created by regulatory authorities to allow businesses, particularly innovative fintech companies, to test and experiment with new products, services, or business models in a supervised and flexible manner. The concept of a regulatory sandbox is rooted in the recognition that traditional regulatory licensing frameworks may not always accommodate emerging technologies or innovative business models adequately. By establishing a sandbox, regulators aim to strike a balance between fostering innovation and protecting consumer interests, financial stability, and regulatory integrity.

Generally speaking, regulatory sandboxes offer relaxed licensing standards with stringent requirements as to the scope of operations (usually defined by a revenue cap during the sandbox stage) and the length of time a participant may operate in the sandbox environment. The cost to apply for, and enter a regulatory sandbox, is a fraction of that required to obtain complimentary license outside of the sandbox.

Notable Fintech Regulatory Sandboxes

Regulatory sandboxes have been implemented in various countries around the world. The more notable Fintech regulatory sandboxes include:

  1. United Kingdom: The Financial Conduct Authority (FCA) established one of the first regulatory sandboxes in 2016. The FCA Sandbox allows fintech companies and startups to test innovative financial products, services, and business models under controlled conditions.
  2. Singapore: The Monetary Authority of Singapore (MAS) launched the FinTech Regulatory Sandbox in 2016. It provides a platform for fintech startups and companies to experiment with their solutions and services while receiving guidance from regulators.
  3. Australia: The Australian Securities and Investments Commission (ASIC) introduced the ASIC Innovation Hub in 2015. It offers a regulatory sandbox to fintech companies, allowing them to test their ideas and navigate regulatory requirements.
  4. United Arab Emirates: The Abu Dhabi Global Market (ADGM) launched a Regulatory Laboratory (RegLab) in 2016. It enables fintech and innovative startups to develop and test their financial services offerings in a controlled environment.
  5. Malaysia: The Bank Negara Malaysia (BNM) introduced the Financial Technology Enabler Group (FTEG) in 2016. FTEG provides a regulatory sandbox for fintech companies to experiment and validate their solutions while collaborating with the regulator.
  6. Thailand: The Bank of Thailand established the regulatory sandbox framework in 2017. It allows fintech companies to test their products and services in a controlled environment under the supervision of regulators.
  7. Canada: The Ontario Securities Commission (OSC) launched the OSC LaunchPad in 2016. It provides support and guidance to fintech businesses, helping them navigate securities regulations while testing innovative products and services.
  8. Hong Kong: The Hong Kong Monetary Authority (HKMA) launched the Fintech Supervisory Sandbox in 2017. It allows fintech firms to conduct pilot trials of their financial innovations in a controlled environment.

Case Study – The Singapore Fintech Regulatory Sandbox

The Singapore Fintech Regulatory Sandbox is perhaps the most popular sandbox for Fintech companies. Companies that are licensed with MAS or unlicensed may apply for the sandbox. The process for application and acceptance begins with the submission of an application and an initial 21 day suitability review by MAS. That review will consider a number of factors, including:

  1. Does the applicant have a well-defined project proposal and demonstrate the potential for significant innovation and consumer benefit?
  2. Does the applicant offer genuinely innovative propositions that have the potential to deliver benefits to consumers or the wider market?
  3. Does the applicant demonstrate a potential for consumer benefit, such as increased access, improved efficiency, enhanced competition, or better outcomes for consumers?

If deemed suitable by MAS, the application will move to the Evaluation Stage. During this stage, MAS evaluates the application based on various criteria, which may include the novelty of the solution, potential for consumer benefit, scalability, viability, alignment with regulatory objectives, and adequacy of risk management measures. This also involves evaluating whether the project demonstrates a clear need for sandbox testing and whether it aligns with the sandbox objectives of fostering innovation while maintaining consumer protection and regulatory integrity. It is common for MAS to provide feedback to the applicant on their sandbox application, which may include seeking further clarifications, requesting additional information, or suggesting modifications to the project proposal. Applicants are allowed to amend or supplement their application at any time during this stage.

Provided the application is approved, the applicant may commence operations and enters the Experimentation Stage. MAS will provide the applicant with notice of the same together with a statement of sandbox requirements – i.e. what typical regulatory requirements are being relaxed for the applicant. The relaxed requirements are generally centered around lower minimum capital and liquidity requirements. Quite obviously, not two applications or acceptance thereof are identical and therefore it is difficult to prognosticate as to exactly what MAS will require. Moreover, MAS will state the length of time in which the applicant can operate in the sandbox environment, which at a minimum is 6 months but can be as long as 18 subject to the applicant petitioning MAS for an extension.

Notably, MAS does not impose a maximum revenue threshold on sandbox participants.

On the other hand, if the applicant is rejected, it may re-apply, but only after a three (3) month “cooling off” period.

Upon exiting the sandbox, the company is typically expected to transition its operations into the regular regulatory framework applicable to its industry or sector. This transition involves complying with the relevant regulatory requirements, licenses, and obligations that apply outside the sandbox. In Singapore, this normally entails that the former sandbox fintech company apply for and obtain a Class F Money Transmitter License.


Regulatory sandboxes, while still in their relative infancy, provide a regulated testing environment for fintech companies that offer innovative, yet commercially unproven, technologies a cost-effective option to bring their solutions to market.

As always, be sure to reach out to me with any questions or book a meeting here.

About Adam Tracy

Adam Tracy is a payments expert and entrepreneur who specializes in payment systems, blockchain technology, digital currencies, and other emerging technologies. He is the founder of Blockrunner, LLC that provides consulting services to clients in the blockchain, payments and cryptocurrency arenas.

Tracy has been involved in the payments industry as an attorney, consultant and entrepreneur since 2005, while he was become an expert in blockchain and cryptocurrency since its advent in 2013. Tracy has worked with a wide range of clients, including startups, established businesses, and investor – both in the United States and worldwide. He has advised clients on a wide range of compliance, legal and operational issues related to payment transfer systems, crypto token generation and architecture, cryptocurrency exchanges, regulatory licensing, smart contracts, and other blockchain applications.

In addition to his consulting work, Tracy has founded several companies in the payments, blockchain and cryptocurrency space, including a digital asset hedge fund, licensed electronic money institution and a blockchain-based tokenization platform. He is also a proponent of decentralized finance (DeFi) and has been involved in various DeFi projects.

Tracy is also a frequent speaker and writer on blockchain and cryptocurrency topics. He has been featured in a wide range of publications, including Forbes, CoinDesk, and Bitcoin Magazine.

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