The Monetary Authority of Singapore is consulting on proposals for what it calls a “regulatory sandbox”, which will allow firms to experiment with financial technology solutions in a relaxed regulatory environment, in what is seen as a smart move by market participants.
It is the first Asian regulator to do this, noted Mark Wightman, partner for wealth and asset management advisory at consultancy EY in Singapore. This sees it follow in the footsteps of the UK’s Financial Conduct Authority (FCA) and reinforces the market view that the Lion City is well ahead of Hong Kong on this front.
MAS has been actively promoting the city-state as a fintech hub for Asia. “Singapore is possibly an ideal market for this, as it has a long history of encouraging and developing tech solutions for industry, so to add fintech makes sense,” said one industry player.
Will Hong Kong follow suit? “I doubt Hong Kong would want to do this, as the Securities and Futures Commission [SFC] is currently too concerned about investor protection,” he added. The regulator’s concern might be that it would not be able to exercise sufficient control over mainland Chinese firms looking to conduct such testing, he noted.
The Hong Kong SFC did not respond by press time to a request for comment.
The sandbox would allow companies to experiment with providing new fintech products or services to customers in a well-defined space, where regulatory requirements are relaxed.
Taiwan is also looking to develop itself as a regional fintech hub, as reported, but has not yet launched a similar initiative.
The MAS proposal said applications to conduct testing should be assessed on several criteria, such as: whether the solution is truly innovative – that is, it is not commonly used and will benefit customers; and whether the applicant has the ability to deploy the solution in Singapore on a broader scale – for example, if it has secured S$5 million ($3.7 million) in funding or has a sound business plan.
Interested firms are invited to approach MAS to discuss how their innovative fintech solutions can be launched, even while the proposals are being consulted on. The regulator will inform the applicant whether the proposal is potentially suitable for the sandbox within 21 working days.
Jacqueline Loh, deputy managing director of MAS, said: “The sandbox will help reduce regulatory friction and provide a safer environment for fintech experiments. We believe this will give innovations a better chance to take root.”
The public consultation started yesterday and will be open until July 8. A copy is available on the MAS website.
The FCA set out plans last month for its own sandbox, which it described as “a safe space in which businesses can test innovative products, services, business models and delivery mechanisms without immediately incurring all the normal regulatory consequences of pilot activities”.