SBP Issues Draft Guidelines for Regulatory Sandboxes

As part of its 5-year strategic plans, the State Bank of Pakistan (SBP) initiated its efforts to set up regulatory sandboxes by rolling out its draft guidelines for consultation and feedback from potential stakeholders and experts in the relevant field. In line with international best practices to promote innovation in the area of digital financial services (DFS), SBP is introducing the guidelines for: The establishment of regulatory sandboxes has been adopted by many regulators globally for new entrants as well as established players who are looking for clarity around new digital solutions that do not easily fit into the existing regulatory framework. The Regulatory Sandbox may be defined as a controlled regulatory environment provided by the regulators for experimenting limited scale, live tests of innovative technologies, products, services, processes, etc. for a restricted period to evaluate their commercial viability and also to determine the enabling regulatory environment that will be conducive for these innovative solutions. On the other hand, Technical Sandbox represents a dynamic testing environment, provided by the regulator, that welcomes Innovators, Fintech startups, and established Financial Institutions to test and experiment with their innovative technologies and proposed payment solutions. The regulator provides a safe and controlled space for testing and refining their new payment methods and services. The objectives of the guidelines for Regulatory Sandbox are to: Technical Sandbox for RAAST is aimed to ensure that innovations seamlessly integrate into the broader financial market infrastructure. This will specifically: These Sandboxes are primarily aimed at the products and services that are not yet regulated or conservatively regulated by SBP. SBP Sandboxes are open to entities that propose solutions that involve products or technologies that are currently not covered under any policy and regulation of SBP and are not already available in the market. This encompasses entities that provide products and services for the promotion of DFS and financial inclusion in the country. And, regulated entities if they face regulatory restrictions to market any product or service. Eligible Entities for Regulatory Sandbox and Technical Sandbox The applicant willing to participate in the Sandbox must demonstrate expertise such as innovation, consumer utility, increased security, increased accessibility, enhanced consumer, experience, decreased onboarding time, scalability, and improved price benefit.