FCA explores creation of global sandbox

FCA explores creation of global sandbox

The UK's Financial Conduct Authority is looking into the creation of a global regulatory sandbox, enabling fintech firms to carry out tests in different countries at the same time and helping watchdogs to identify and solve common cross-border problems.

Since it was launched in 2016, the FCA's domestic regulatory sandbox has been used by 60 firms to test their innovation with real customers in the live market under controlled conditions. The regulator says that the initiative has proved a big success, helping to cut the time and cost of getting new ideas to market.

Authorities in other countries have followed the FCA's lead; just this week, the South African Reserve Bank said that it is exploring creating a sandbox and the Saudi central bank promised to provide a sandbox for banks to try out technology from Ripple.

The FCA says that, while it has nine bilateral cooperation agreements with other jurisdictions which encourage dialogue between regulators, it does not offer firms the chance to participate in a joint sandbox programme.

The FCA is now looking into how this can be changed, arguing that the worldwide nature of financial markets and fintech makes a more integrated system - a global sandbox - an attractive proposition.

This could help firms looking to develop technology in areas where cross-border testing is particularly important, such as anti-money laundering. A global sandbox could also help specific firms with cross border ambitions, and help regulators address policy challenges.

"The overall approach would be to better understand and solve common regulatory problems, as well as being more helpful to firms who have aspirations to grow at scale in multiple markets. The degree to which different regulators are involved in each part of the sandbox could vary," says the FCA.

The FCA concedes that a true global sandbox may be ambitious, suggesting that initially it could just be an international college of regulators who have their own innovation or sandbox models. In this scenario, firms already working with those regulators would get access to multiple regulators.

At the moment, the watchdog is simply asking for feedback from interested parties - firms doing business, or looking to do business, in the UK or overseas, as well as other regulators and consumers. Questions for consideration are on the FCA website, with a further update expected in March.

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