“In order to promote and support entrepreneurship, to stimulate competition in the market and to ensure adequate protection of consumers, investors and the capital market […] the Minister of Economy and Finance, […] adopts, […] one or more regulations to define the conditions and methods of carrying out a trial relating to the techno-finance activities (Fintech) aimed at pursuing service innovation through new technologies such as artificial intelligence and distributed registers and products in the financial, credit, insurance and regulated markets sectors. […] “.
These are some of the words contained in the so-called 2019 Growth Decree published in the Official Journal which states the introduction, in Italy, of a sandbox to facilitate the development of fintech, and that is the possibility for companies to have an isolated and safe environment, where developers test new programs before the final deployment phase and then its launch. Sandbox and Fintech, however, to look at them well do not have such a close bond, or better, one might think that these have to do with the tech in the sector and that they can therefore be like Blockchain or similar. In order to have a complete view of the issue we must in fact speak of a regulatory Sandbox, that is, of the fact that Sandbox is actually inherent to strictly legal and regulatory aspects relating to Fintech.
These are some of the words contained in the so-called 2019 Growth Decree published in the Official Journal which states the introduction, in Italy, of a sandbox to facilitate the development of fintech, that is the possibility for companies to have an restricted and safe environment, where developers test new programs before the final deployment phase and then its launch. Sandbox and Fintech, however, to look at them well do not have such a close bond, or better, one might think that these have to do with the tech in the sector and that they can therefore be like Blockchain or similar. In order to have a complete view of the issue we must in fact speak of a regulatory Sandbox, that is, of the fact that the Sandbox is actually inherent to strictly legal and regulatory aspects relating to Fintech.
Let’s analyze the question in more detail: beyond the innovative and futuristic aspects, regulatory issues are the central node of fintech development. The real challenge for the full development of this market is played in fact in the regulatory sphere, even before technological and economic. The countless opportunities offered by fintech are now known, ranging from equity crowdfunding to Ico, from electronic payments to bitcoins, from online trading to robo-advisory. However, when the concept of industry evolves so rapidly, including therefore the companies and the technologies within it, it is not always clear whether and to what extent the necessary regulations must be applied and this generates enormous risks, especially in areas such as Fintech, ground of possible prey or actors of fraud, cyber attacks or money laundering. A regulatory sandbox is therefore a structured and controlled environment within which regulations can be formulated at a fairly high rate but in which companies have time to develop further innovations.
It is equally clear, however, that this cannot be achieved through a simple extension of the rules valid for traditional finance to technological finance. As highlighted by the European Commission’s Fintech 2018 action plan, the legislator must try to maintain a fast, global and proportionate approach. An excess of fragmented rules would risk bringing the system to a standstill, and in terms of proportionality, the criteria with which these regulations must be adopted are relative to:
• A maximum experimentation period of eighteen months
• Reduced capital requirements
• Simplified and proportionate compliance with the activity to be undertaken
• Reduced time for administrative procedures
• Definition of specific operational perimeters
In short, when we hear about Sandbox we mean structured test environments where fintech innovations can be verified in collaboration with the supervisory authorities, which maintain a margin of discretion and flexibility in the adoption of the rules, and with a limited circle of final customers , aware of the fact that the products they use are still in the testing phase. It is also envisaged that the temporary control measures can be differentiated according to specific cases, but they must still guarantee adequate information to consumers and investors and the proper functioning of the market.
However, for admission to the trial, individual authorities are given ample power to adopt the most appropriate initiatives for the purpose of carrying it out, also temporarily authorizing those who have completed the same to operate on the markets, pending any regulatory adjustments.
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