A Regulatory Sandbox is identified as a test bed in which the supervisory authority will allow testing innovative technology-based projects in the financial field, with real users, under the control and supervision of the competent authority.
On November 4, 2020, the Senate approved the Bill for the Digital Transformation of the Financial System, which introduces an appropriate legal environment to ensure that innovation in the financial sector develops in an efficient and safe manner for users.
In terms of regulation and supervision, it was one of the greatest innovations made to date by the supervisory authorities, since the ultimate objective of the Sandbox will be to support the development of innovative projects under a legal and secure framework, which, due to the novelty of their business model, have no place in the current regulatory framework.
What advantages can the Sandbox bring to my project?
The entry of the project into the Sandbox is the opportunity to demonstrate and evaluate its visibility from a business and regulatory point of view under the supervision of the competent authority (CNMV, Bank of Spain or DGSFP). The objective is to launch to the market those products or services that perhaps are not being offered today because there is a regulatory brake, and thus be able to operate in the market with legal certainty.
What are the requirements to enter the Sandbox?
There are certain requirements that must be met in order for the project to access the Regulatory Sandbox. Some of them are:
- To provide technology-based innovation applicable to the financial system.
- Be sufficiently advanced to be tested.
- Benefit users of financial services.
- Increase the efficiency of financial entities or markets.
- Provide mechanisms to improve financial regulation or supervision.
And how does the Sandbox work in Spain?
Firstly, the entry of projects to the Sandbox must be requested at the electronic headquarters of the General Secretariat of the Treasury and International Finance. The application must be accompanied by an Annex of required questions and an explanatory report of the project detailing the business model and the justification for its entry into the controlled testing space.
The competent authorities will then evaluate the project and the details of its application to determine its suitability for access to the Sandbox. Those that do not meet the requirements will be automatically discarded by means of a reasoned statement.
The entity that is considered suitable for access to the Sandbox will start its business activity after the approval of the testing protocol, once the informed consent of the participants has been obtained and the system of guarantees and indemnities foreseen has been activated. The duration of the tests will be for an initial period of 6 months, which may be extended.
If you consider that your project meets the requirements and you wish to submit an application to access the regulatory sandbox regime in Spain, do not hesitate to contact us and we will be happy to help.
