Page 58 - ITU-T Focus Group Digital Financial Services – Recommendations

ITU-T Focus Group Digital Financial Services
Recommendations

Title of recommendation Use of regulatory sandboxes to encourage DLT and Fintech innovation
Working Group Technology, Innovation and Competition

Workstream Distributed Ledger Technology
Audience for recommendation Regulators in the DFS ecosystem

Regulatory sandboxes that allow DLTs to be tested in markets should be embraced by regulators in a familiar
form to that of the ‘test and learn’ regulatory philosophy used for the first DFS implementations.

An emerging tool being used by some regulators are so-called regulatory sandboxes that allow new technology
and financial innovations.

These allow financial technology (FinTech) companies and new technologies to get the benefit of temporarily
avoiding the full regulatory process to which a FinTech product or service launch would typically be subject.
The intent is to encourage and enable experimentation of solutions that leverages technology innovatively
to deliver improved financial products and services to both consumers and businesses. Normal consumer
protection rules still apply during the testing phases, and usually these technologies must later obtain all the
necessary regulatory permissions, when the sandbox scheme has come to an end.

In a DFS context, the sandbox concept is of a familiar form to the ‘test and learn’ regulatory philosophy of
forbearance that bootstrapped the emergence - and huge global success - of DFS transactional platforms.

The concept could be ‘formalised’ by regulators in terms of sandboxes and extended to broader range of
services that can be enabled through DLTs.

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