Bank Negara has released a paper on the financial technology regulatory sandbox framework including the objectives, applicability and interpretation of the legalities set to surround fintech.
The paper states that the primary objective of introducing a regulatory sandbox for fintech start-ups is to enable innovation to be tested in a live environment, within specified parameters and with limited consequences.
Bank Negara defines a sandbox within the paper as ‘a live, contained environment in which participants may test their product, service or solution subject to the requirements under the framework.’
As stated in the paper, the Bank will seek to provide a framework which is conducive for the deployment of fintech, as well as targeting existing regulation that unintentionally prevents current innovative processes. It is acknowledged that risk and failure are expected steps in the development process of digital initiatives, which the framework will seek to address.
The objectives of the frame work include:
- Creating a safeguard to manage risks and contain the consequences of failure
- Considering the appropriate level of participants using the sandbox and one time
- Fostering an innovative and collaborative development space
Applicants for the sandbox must meet the following criteria:
- An idea in development for a project to improve the accessibility, efficiency, security or quality of financial services
- A realistic business and contingency plan
- The participant aims to deploy the product for commercial sale in Malaysia
- Appropriate risk assessments and basic functionality testing has already been executed
- The provision of the product is at least partially incompatible with current law
The framework is effective as of 18 October 2016.