Issue link: https://maltatoday.uberflip.com/i/1272062
23.07.2020 6 INTERVIEW MFSA Regulatory Sandbox: A safe testing ground for FinTech operators We want innovation to occur within the financial services market, and the Sandbox will be an environment which provides FinTech operators with a means of testing their solution within the market In May last year, the MFSA published its FinTech strategy. One of its objectives was the launching of a Regulatory Sandbox. Could you explain what the Regulatory Sandbox is? e FinTech Regulatory Sandbox provides a regulatory environment for FinTech operators to test their solution within the financial services market un- der prescribed conditions. e Regulatory Sandbox has four ob- jectives, with innovation being the first. We want innovation to occur within the financial services market, and the Sand- box will be an environment which pro- vides FinTech operators with a means of testing their solution within the market. e second objective is Sustainability, by which we mean that we want that all innovation is beneficial to the market and the ultimate consumer. e third objective of the Sandbox is Certainty, which will enable FinTech operators to operate within the market with confidence, knowing that their in- novation is not breaching any European or national law. Knowledge-Sharing is the fourth ob- jective. rough close collaboration with the participants, the MFSA will be in a better position to understand the solution being proposed by the partic- ipant, the innovation occurring within the financial services market, and the implications of this on our regulatory frameworks. If we determine that the innovation being proposed in the market is not fully in line with our current require- ments – and therefore if we determine that there are gaps in terms of our reg- ulatory frameworks – the MFSA will be in a better position to understand those gaps and to develop the appropriate policy response to mitigate them. Who would be eligible to apply to participate in the Regulatory Sandbox, and what are the MFSA's criteria in this regard? As the name implies, the Sandbox is open to FinTech operators, by which we mean technology-enabled financial innovation which leads to new business models, applications, processes and products which will have a material ef- fect on the financial services market. In this respect, the Sandbox will cater for three types of participants: FinTech service providers, FinTech suppliers, and other applicants. By FinTech service providers, we mean those FinTech operators who are offer- ing a FinTech solution which requires authorisation under already existing fi- nancial services legislation. e second category, FinTech suppli- ers, refers to those FinTech operators offering a FinTech solution which does not require authorisation under exist- ing financial services legislation. e third category, other applicants, caters for those FinTech operators which, at face value, seem to be engag- ing in an activity which qualifies as a fi- nancial service, but whose activity does not qualify clearly under existing finan- cial services legislation. Interested participants must fulfil four eligibility criteria to participate in the Sandbox, these being Innovation, Need, Benefit and Readiness. How can an eligible firm apply to test within the Sandbox, and how does it work in practice? e Sandbox has been structured in such a way as to be open for interest- ed participants on an ongoing basis. erefore, anyone interested in partic- ipating within the Sandbox can apply at any time via the dedicated proposal form on the MFSA website. e Sandbox lifecycle is divided into two phases: the pre-testing phase and the testing phase. During the pre-test- ing phase, the MFSA will assess the pro- posal, select the applicants and deter- mine the respective testing parameters. During the testing phase, the MFSA will monitor the progress of the partic- ipants in line with the testing parame- ters identified during the pre-testing phase, and determine the appropriate way forward outside of the Regulatory Sandbox. The Malta Financial Services Authority yesterday launched the FinTech Regulatory Sandbox. Luciano Brincat, Senior Manager – FinTech & Innovation at MFSA speaks to BusinessToday about this new testing environment for operators MASSIMO COSTA