THE FINANCIAL Conduct Authority (FCA) is considering developing a global regulatory sandbox that enables fintechs to conduct tests in different jurisdictions at the same time.
It would also enable regulators to work together and solve common cross-border regulatory problems.
Currently, the FCA’s sandbox, which launched in 2016, only allows firms to conduct tests in the UK.
The regulator said many aspects of financial markets and fintech are global and that firms value being able to work with other regulators to conduct tests in more than one jurisdiction.
“We want to ensure we continue to create the right conditions for firms who are looking to develop and launch innovative businesses models that benefit consumers,” the FCA said.
The regulator pointed out that firms face regulatory problems that cross jurisdictional boundaries, for example developing innovative solutions to Anti-Money Laundering (AML) compliance and Know Your Customer (KYC) on-boarding, and payments services that seek to transfer money cross-border.
It said a global sandbox could help regulators and firms work together to define where these common problems exist and collaborate to find solutions.
“Under this approach, participating regulators could set out areas where cross-border testing would be most beneficial, and invite firms to participate in the global sandbox to propose tests to explore these,” the FCA said. “Firms would benefit from having access to support from multiple regulators in the design and supervision of their test.”
It suggested the global sandbox could allow firms to bring their ideas to market more quickly, creating more effective competition.
It added: “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.”
Read more: Orca accepted into regulatory sandbox scheme
One option is for the global sandbox to be initially set up as an international college of regulators who have their own innovation or sandbox models. Firms already working with those regulators would get access to multiple regulators.
The FCA has set out questions for consideration on its website and wants to hear from interested parties on the viability of the proposal by 2 March.
Since it was launched in 2016, the FCA’s regulatory sandbox has helped 60 firms to test their innovation with customers in the live market under controlled conditions.
Of the firms that tested in the first cohort, 90 per cent are progressing towards a wider market launch and at least 40 per cent received investment during or following their sandbox test.
Read more: FCA to push for global fintech framework