The Regulatory Sandbox license: Fast set up of new ventures

With the emergence of concepts that include Industry 4.0, the Internet of Things and Fintech representing billions of dollars, governments are actively engaged in creating the right environment through policy advocacy and practices to leverage the game changer growth prospects represented by these innovation-driven industries. Often, however, the major hurdle that needs to be overcome is the absence of a complete set of regulatory framework to facilitate such ventures, thereby curbing innovation.

It is with this objective in mind that the Regulatory Sandbox License (RSL) has been introduced as a means of positioning Mauritius in the league of select countries enabling promoters and entrepreneurs to engage in innovative and high value-added activities relying on the dynamic technological evolution.

Essentially, the RSL will offer a ‘safe space’ to test promising projects within set parameters which act as temporary frameworks and that are inspired from proven worldwide best practices. Following the testing period and upon demonstration of the applicability, compliance and benefits of the project, the temporary framework can be adapted to formulate adequate regulations for these new industries.

This measure acts as a time-saving device pending the provision of a legislative framework, a key fundamental in attracting high-level entrepreneurs who can spearhead the high-tech SME sector in Mauritius. In addition, the RSL also facilitates the upgrading of existing regulations following proven efficient and adequate legislation. Through the RSL, the promoter will be provided with the terms and conditions of the project as well as the information relating to the framework.

The Regulatory Sandbox License will be issued by the Board of Investment. It will act as a framework for the implementation of projects with significantly promising ripple effects on the economy, the job market, technology and the transfer of know-how. However, to ensure sectoral stability and safeguard the country’s reputation, the Board of Investment is working in close collaboration with relevant stakeholders with a view to judiciously evaluating the requests for licenses under the RSL regime.

One of the most successful examples of technological and economic breakthrough achievements through a Regulatory Sandbox is the UK’s Financial Conduct Authority (FCA). FCA’s Regulatory Sandbox focuses only in the Fintech sector, as opposed to the Mauritian Regulatory Sandbox which makes provision for projects irrespective of business segments.

To date, the UK’s Financial Conduct Authority has accepted 24 applicants, from a total of 69, to participate in its Fintech Sandbox, where innovative financial products can be tested before proceeding to authorisation. These include, inter alia, the setting-up of an e-money platform enabling transfer and holding of funds using phone based application, Blockchain enabled cross-border money transfer, a smart-card enabled retail payment system based on their OpenCSD distributed ledger.

New Zealand and Singapore respective monetary authorities have also set up regulatory sandboxes to give innovations a better chance to root up with the aim of improving the financial sector and developing new services and products to support their economy. The U.S., already well-advanced in terms of technological progress, have announced a House Bill that aims to set up ‘Sandbox’ for Fintech innovation recently to curb the migration of innovators to other shores.