On June 6, 2016, the Monetary Authority of Singapore (MAS) released a consultation paper detailing guidelines for a ‘regulatory sandbox’ enabling both financial and non-financial institutions to experiment with financial technology solutions. Promising innovations may be stifled and opportunities missed as firms may be unclear on whether a new product or service complies with legal and regulatory requirements, and consequently may choose not to pursue their new product or service further. That is where the ‘regulatory sandbox’ comes in, allowing firms to experiment with fintech while providing the appropriate safeguards to contain the consequences of failure for the customers.
Any interested firm can adopt an experimental sandbox to experiment within a well-defined space and duration; the MAS will provide the appropriate regulatory support and will relax certain legal and regulatory requirements. The sandbox for each interested firm will have to meet certain evaluation criteria:
- The fintech solution must technologically innovative.
- The fintech solution must benefit consumers and address a significant problem or issue.
- The applicant must have the intention and ability to deploy the solution in Singapore on a larger scale.
- The applicant will need to report to the MAS on the test progress based on an agreed schedule.
- The appropriate boundary conditions should be defined protecting interests of consumers and the industry.
- Major foreseeable risks have to be assessed and mitigated
- An acceptable exit and transition strategy needs to be clearly defined in the event of discontinuation or deployment on a larger scale.
Deputy Managing Director of the MAS, Ms Jacqueline Loh, stated that, “MAS aims to provide a responsive and forward-looking regulatory approach that will enable promising FinTech solutions to develop and flourish. The sandbox will help reduce regulatory friction and provide a safer environment for FinTech experiments. We believe this will give innovations a better chance to take root.”
The positive sentiment toward fintech and virtual currencies such as bitcoin from Singapore’s prime minister late last year has been taken on board by the MAS with this new approach to bringing fintech solutions to the mainstream. Last year, Prime Minister Hsien Loong advised the country’s banks and regulators to explore the advantages and applications of technologies such as Bitcoin. In April, the country expressed its desire to become the leading hub in Asia for blockchain-technology and fin-tech start-ups.
The MAS is seeking comments on these proposed evaluation criteria as well as other issues from the public, until July 8, 2016. With this sandbox approach the MAS hopes to encourage and help firms experiment with innovative solutions to support their development.
Singapore is fast becoming a major player in the fintech world, with the Association of Crypto-Currency Enterprises and Start-ups Singapore (ACCESS) joining the Global Blockchain Forum, an international effort to facilitate blockchain innovations across national jurisdictions. Also, Singaporeans are becoming more enthusiastic buyers of Bitcoin. Over the past 24 hours, the Singapore Dollar represented the 5th largest currency exchanging into Bitcoin with over 2,000 BTC traded. This represents a 0.18% market share in terms of currencies, with the Chinese Yuan leading with almost 90% of all Bitcoin transactions in the past 24 hours.