In support of its objective to transform Singapore into a smart financial centre, the Monetary Authority of Singapore (MAS) offers a regulatory sandbox (the Sandbox)to encourage financial services providers adopt innovative but safe financial technology. The Sandbox enables companies to experiment in a live market environment under relaxed legal and regulatory requirements for a limited time.
MAS launched the Sandbox in late 2016. (Please see our article providing an overview of the Sandbox.) The original Sandbox is designed to provide bespoke regulatory support for companies operating in all financial services sectors that employ technology not then in use in Singapore (i.e., first movers).
To provide faster support for companies operating lower risk financial services, MAS released Sandbox Express in 2019. (Please see our article on Sandbox Express.) MAS aims to respond to Sandbox Express applicants in 21 days, and approval allows participants to conduct market testing experiments for up to 9 months. Sandbox Express is available to insurance brokers and recognised market operators. (The availability of the Sandbox Express to remittance businesses was ceased in January 2020 due to the commencement of the Payment Services Act 2019.)
Beginning1 January 2022, MAS will make the Sandbox available to a wider spectrum of companies and will provide financial support to qualified participants. Unlike the original Sandbox and Sandbox Express, which are limited to first movers, the new Sandbox Plus programme expands eligibility to include companies that are among the first, but not necessarily the first, to employ a financial technology in Singapore (i.e., early adopters).
The Sandbox Plus programme also offers new financial incentives to first movers applying for the original Sandbox. Successful applicants can receive up toS$500,000 to cover 50% of eligible expenses, including base salaries for personnel, professional services, hardware and software infrastructure and licences, equipment and IP rights, and certain training costs.
The Sandbox is an attractive option for companies developing financial technologies and business models that are promising but unproven or not widely adopted.
In addition to basic information about the applicant, the Sandbox application requires the applicant to provide information in five areas:
The remainder of this article provides guidance and tips for companies applying to join the Sandbox.
As a preliminary matter, the applicant must consider whether its service is ready for experimentation in the Sandbox. For example, has the applicant successfully completed development and laboratory testing? The purpose of the Sandbox is to enable participants to test a version of their service that is almost ready for full commercial release, not as a way to incorporate live customers into their product definition and development processes.
The application requests information about the applicant’s service in four dimensions:
Legal and Regulatory Requirements
Under the Sandbox, MAS grants participants relief from certain legal and regulatory requirements while they conduct their Sandbox experiments. However, it is important to note that MAS will not relax requirements related to customer safety, such as protections for customer information and funds, or those related to anti-money laundering and countering the financing of terrorism (AML/CFT).
Fitness and Financial Standing
The profile of the applicant, including its financial health and track record, and of the applicant’s key stakeholders – the directors, the CEO and other senior leaders critical to the success of the applicant’s business – are focus areas in MAS’s evaluation of a Sandbox application.
The applicant must also consider whether the applicant itself or any of its key stakeholders meet MAS’s fit and proper guidelines, especially those related to honesty and integrity.
The Sandbox Experiments
In its Sandbox documentation, MAS refers to participants’ ‘experiments’ during their Sandbox periods, i.e., a test to determine whether a hypothesis is true where the outcome is uncertain. The Sandbox application contemplates that the applicant will conduct multiple experiments during the Sandbox period.
Finally, the applicant must carefully consider and describe how it will manage its exit from the Sandbox. If its Sandbox experiments are successful and it will launch a full commercial version of its service, what does that full commercial version look like and how will customers be transitioned to that version?
OrionW regularly advises clients on financial technology matters. For more information about financial technology regulations, or if you have questions about this article, please contact us at firstname.lastname@example.org.
Disclaimer: This article is for general information only and does not constitute legal advice.