The UK’s Financial Conduct Authority (FCA) is looking for views on the merits of creating a global fintech sandbox.
This new model could potentially allow firms to conduct tests in different jurisdictions at the same time and allow regulators to work together and identify and solve common cross-border regulatory problems, through tests. Under such a model, testing could span two or more jurisdictions.
Since it was launched in 2016, its sandbox has supported 60 firms in the UK to test their ideas with real customers in the live market under controlled conditions. As reported in December, its fourth sandbox phase was looking for new faces.
This UK model reduced the time and cost of getting ideas to market, and the FCA says 90% of firms that tested in cohort 1 progressed towards a wider market launch.
However, the FCA explains that its sandbox currently only allows firms to conduct tests in the UK “but many aspects of financial markets and fintech are global”.
It says: “Some firms value being able to work with other regulators to conduct tests in more than one jurisdiction. We have also observed, supported and learned from the work of many other jurisdictions in how they promote innovation in financial services.”
The FCA also cites its nine bilateral cooperation agreements with other jurisdictions.
Therefore, in terms of its worldwide ambitions, it wants your views on the mega-model. To give you an idea of what the FCA thinks a global sandbox should look like, it sets out a few pointers.
It says it knows firms face certain regulatory problems that cross jurisdictional boundaries, for example developing solutions to anti-money laundering (AML) compliance and know your customer (KYC) onboarding, and payments services that seek to transfer money cross-border.
The global sandbox could also convene joint events and/or papers on emerging trends and challenges.
According to the FCA, one option is that the initial set up is an international college of regulators who have their own innovation or sandbox models.
It’s all just talk at the moment, but you can get more information and give feedback to the FCA here.