The challenge for central banks and regulators here is to stay abreast with emerging business models and innovation, to understand the inherent risks of these new models, and to know how to proportionately manage the risks. This will require capacity to undertake the said functions.
A number of central banks, including the BSP, have turned to the “test and learn” approach, more recently known as the “regulatory sandbox” to address this gap. The “sandbox” approach presupposes a dialogue and collaborative relationship between the central bank and the industry innovators.