Singapore FinTech: Regulatory Sandbox open for applications

Singapore FinTech: Regulatory Sandbox open for applications | Norton Rose Fulbright

Global Publication November 2016

Singapore’s financial regulator, the Monetary Authority of Singapore (MAS), has launched guidelines for its FinTech Regulatory Sandbox, which is now open for applications.

The announcement of the guidelines release was made by MAS Managing Director Mr Ravi Menon as part of the Singapore FinTech Festival on November 16, 2016.

What is the Sandbox?

The Singapore regulatory sandbox is available to financial institutions or any interested business that wishes to experiment with innovative financial services in a production environment but within a defined space and duration.

When a regulatory sandbox was first proposed by MAS in a consultation paper in June 2016, interested firms were encouraged to approach MAS to discuss how their FinTech solutions could be launched while the proposed guidelines were being considered and finalised.

The guidelines incorporate the feedback that the MAS received from the industry and have been road-tested against the approaches they have received from interested businesses.

The objective of a regulatory sandbox is to encourage innovation and experimentation of novel FinTech products, where for a defined period, the regulator will agree to relax certain regulatory requirements that a business would otherwise be subject to. Several jurisdictions including the United Kingdom, Malaysia and Hong Kong have also introduced a regulatory sandbox.

The guidelines explain the objectives of the sandbox and provide guidance on the application process, including a template application form and a practical example to illustrate MAS’ expectations on matters such as the evaluation criteria for entry into the sandbox. Applications for entry into the regulatory sandbox may be made at any time.

Evaluation criteria

The MAS will assess each regulatory sandbox application against the following criteria:

  1. the proposed financial service is new or emerging technology or uses existing technology in a different way;
  2. the proposed financial service addresses a problem or brings benefits to consumers or the industry;
  3. the applicant has the intention and ability to deploy the proposed financial service in Singapore on a broader scale after exiting the sandbox;
  4. the test scenarios and expected outcomes of the sandbox experimentation are clearly defined and the applicant will report to the MAS on test progress on an agreed schedule;
  5. appropriate boundary conditions are clearly defined to execute the sandbox meaningfully while protecting consumer interests and maintaining the safety and soundness of the industry;
  6. significant risks arising from the proposed financial service are assessed and mitigated; and
  7. an acceptable exit and transition strategy is clearly defined in the event the proposed financial service must be discontinued or proceeds to be deployed on a broader scale after exiting the sandbox.

If the application is successful, the applicant is known as a “sandbox entity”.

Relaxation of regulatory requirements

The MAS will determine the specific legal and regulatory requirements it is prepared to relax for the sandbox duration on a case by case basis, however Annex A of the guidelines includes examples of the types of laws and regulations that the MAS may relax and those that it will require to be maintained. For example, the MAS intends to require sandbox entities to maintain confidentiality of customer information and anti-money laundering compliance. On completion of the sandbox duration, the sandbox entity must exit the sandbox and the relaxation of laws and regulations by the MAS will expire.

To ensure transparency, the sandbox entity must notify its customers that the financial service is operating in a sandbox. Customers must acknowledge that they have read and understood the risks with the financial service. The MAS will also publish the names of all approved sandbox entities on its website.

On exiting the regulatory sandbox, the sandbox entity will be able to deploy the financial service on a broader scale provided: (i) the sandbox has achieved its test outcomes, and (ii) the sandbox entity can fully comply with the relevant legal and regulatory requirements.

The FinTech race

At an exciting time for FinTech in Singapore, the issuance of the guidelines reflect the MAS’ commitment to building Singapore into a smart financial centre. The MAS has already received proposals to leverage a range of technology in the regulatory sandbox including distributed ledgers, machine learning, and big data analytics.

In the words of Mr Menon at Singapore's first FinTech festival on Wednesday, “Be it countries, businesses, or people – those who are alert to technology trends, understand their implications, and harness their potential will gain a competitive edge. To be sure, many of these technologies are disruptive to existing jobs and existing business models. But if we do not disrupt ourselves – in a manner we choose – somebody else will – in a manner we will not like.”


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