This is done under the guidance of the regulator, allowing it to keep up with market developments and build the necessary know-how. In other words, such formats serve two purposes. First, they allow innovative start-ups to test their ideas and grasp the regulatory requirements.
Second, ‘sandboxes’ enable regulators to upgrade their toolkits, aligning them with the new generation of business models and technological solutions brought about by FinTech. In recent years, similar formats for regulator engagement with the industry have sprung up widely – from Canada to Australia. Arguably, these developments mark a shift in authorities’ thinking – facilitating innovation instead of aiming to restrict it.