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How did regulatory sandboxes appear?

Last years saw a boom of FinTech market. The term “FinTech” is relatively new and, generally, means all new technologies used and applied in the financial services. On the one hand, FinTech makes the market more competitive, increases financial inclusion, improves user experience, reduces the cost of financial services, increases the transparency of the economy and the effectiveness of AML/CFT measures. On the other hand, the introduction and improvement of innovative products requires work "in the fields" and involves risks. In addition, companies that develop and implement financial technologies risk violating legislative provisions, because regulation in the financial market has historically been quite strict and complex.

This situation has forced regulators to seek for new approaches. Since it is impossible to develop a separate legislation for each new product or business model, along with the inability to leave the financial market without supervision, as this could lead to global negative consequences, regulators in some countries develop a "regulatory sandbox" that allows innovative companies to test their products and services.

What is a regulatory sandbox?

The term "sandbox" is used in programming, where it means an isolated environment for running potentially dangerous code. The regulatory sandbox in the financial market works in much the same way. This is a special set of rules that allows innovative companies to test their products and services in a controlled environment, without the risk of violating the law. Thus, during the experiment, companies can understand how ready their product is, the regulator can develop new rules if necessary.


What are the advantages of regulatory sandboxes?

Potentially, regulatory sandboxes can solve a number of problems. Among them:


- reducing uncertainty for market participants


- developing rules for new technologies


- accelerating the introduction of new solutions to the market


- increasing the availability of investments


- ability to quickly filter out non-working models


- maintaining control by the regulator

How does it work?

The UK first launched a regulatory sandbox in 2015. According to the regulator's rules, testing is carried out within 3-6 months on a limited number of clients, qualified clients must give explicit consent to receive services as part of testing, and unqualified clients retain the right to protect their interests, and companies may be required to develop additional measures to protect consumers. A resident of the sandbox can be either a licensed company or one that does not yet have a permission.

In practice, the process in the UK goes like this:


What's in Russia?

Regulatory sandboxes have been launched by many countries, including Russia. In General, our sandbox is "technological", i.e. it does not provide law relaxation.


Viktor Dostov, the President of the REMA, is a member of the Expert Council of financial market participants for evaluating innovative financial services and (or) technologies.

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Аналитический отчет АЭД «Регулятивные песочницы. Регулирование как сервис» 

Неофициальный перевод отчета британского регулятора о первых результатах работы «песочницы»

Dostov V., Shust P., Leonova A. Choosing the right sand: recreating the success of regulatory sandboxes // Financial Regulation International September. 2018. Vol. 21. No. 7


Достов В., Шуст П., Леонова А., Внедрение регулятивных песочниц на финансовом рынке Великобритании – первый опыт // Ученые записки МБИ. № 4(22)/2017. Стр. 103-114


Достов В., Шуст П., Уроки английского: почему России тоже нужна своя «песочница» //, 9.11.2017   


Dostov V., Shust P., Ryabkova E., Regulatory sandbox as a support tool for financial innovations // Journal of Digital Banking, Vol. 2, No. 2. 2017. Pp.1–10. 


Достов В.Л., Шуст П.М., Российские электронные деньги: 10 лет в песочнице (часть 1) // 25.05.2017


Достов В.Л., Шуст П.М., Российские электронные деньги: 10 лет в песочнице (часть 2) // 31.05.2017

Достов В.Л., Шуст П.М., Рябкова Е.С., Институт «регулятивных песочниц» как инструмент поддержки финансовых инноваций // Деньги и кредит. № 10. 2016. Стр. 51-56

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