FCA to Launch a Global Fintech Sandbox

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“Our ambitions are greater than ever before,” FCA’s Christopher Woolard said at Innovate Finance 2018 after adding:

“The sandbox has been as much an experiment for us as it is for the firms themselves. But, I have to say, for a calculated risk, this bet has really paid off.’

Woolard says they have worked with 500 firms and with 70 of them they have worked in-depth through the fintech sandbox. Those firms include many blockchain companies, as well as other start-ups and global corporations.

“90% of firms from our first round of applications have gone on to market, with many firms finding it easier to get funding as a result of participating in the sandbox,” he said, before adding they’ve learned “an enormous amount about how new technologies are being applied.”

But it’s not enough, they want the sandbox to go global because firms “demand to operate globally, to grow at real scale and pace.”

FCA has signed 10 agreements with regulators from different jurisdictions in this area, but the idea seems to be to in effect join these regulators and sit them under one umbrella so companies can then have one sandbox programme through which they can operate across the world.

“In some quarters, there could be an aspiration for global standards. The logic is clearly there, but my strong suspicion is that it would take twenty years to negotiate and in a fast-moving market would be nineteen years and six months out of date when we got there,” he said.

“There’s real momentum behind this,” he said and they might “start with those jurisdictions which already have established sandboxes or innovation hubs.” That includes US’s CFTC as far as we are aware.

“Later this week we start work with interested regulators, including colleagues across Europe, the US and Far East, on a blueprint,” he told the audience of innovators.

“Participating in a global sandbox would represent a truly momentous step forward,” he argued, “but we think it could do a lot more than just allow innovators to test their ideas.”

Suggesting this global collaboration of a sandbox environment where representatives of different regulators oversee pilots and tests could reduce duplicative regulatory work, especially in areas where there is significant common ground, such as AML/KYC.

“We will be bringing together international partners from the US, Europe, Australia, Japan and Korea in a TechSprint which will focus specifically on developing solutions to the challenges of money laundering, financial crime and terrorist financing,” he said.

Another area was regulatory compliance. Specifically, reducing costs and time delays considering just how fast this area moves.

“We saw for ourselves that it is possible to take a regulatory requirement contained in our handbook and turn it into a language that a machine can understand.

And from that language, machines can respond to the requirement by effectively pulling the necessary information direct from the firm. Not in months, but in seconds. In our sprint, 12 seconds to be precise,” he said.

The idea here seems to be in effect global passporting. But rather than having it applied in such a way whereby compliance with one regulator means access to everyone else’s market, they are seemingly thinking of having a super-regulator of sorts which would presumably mean compliance with that would mean access to all participants’ markets.

“The model should allow some room for us to experiment with what works. So we could see a range of sandbox tests,” he says. With all representative regulators likewise seeing first hand what are the challenges and what could be the solutions.

“Finance is a truly global sector and it only makes sense that we tackle the challenges of our age together,” he says, concluding:

“The opportunities are there for the taking – and we are poised to reach out and grab them with both hands.”

 

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