Mon, Nov 13, 2017 - Page 6 News List

EDITORIAL: From a sandbox to a playground

A draft bill for a “regulatory sandbox” on Wednesday last week passed a preliminary review by lawmakers. If it can clear the legislative floor during the current session, it would allow businesses — either financial institutions or technology firms — to experiment with financial technology (fintech) innovations in a loosely regulated environment. Moreover, it would make Taiwan the first nation in the world to establish a legal basis for such a sandbox framework.

The “sandbox” concept refers to an environment in which participants are allowed to conduct financial service ideas through trial and error without conforming to regulations for a certain period. It would not only benefit start-ups, but also established players that are looking to launch financial products, but have come into conflict with regulations.

Moreover, this regulatory advantage would help Taiwan accelerate fintech development, joining a fintech bandwagon that includes Australia, Canada, Hong Kong, Singapore and the UK, to name a few.

Compared with previous financial bills, work on the sandbox draft appears to be progressing quickly, suggesting that both the administrative and legislative bodies recognize the urgency of establishing a specially designed mechanism for testing new products and supporting the related ecosystem.

However, two major adjustments were made to the draft bill approved by lawmakers, compared with the original version proposed by the Executive Yuan.

First, lawmakers extended the experimental period for fintech developers to as long as 36 months, compared with the 18 months proposed by the Executive Yuan, making it the longest among nations with similar programs.

Clearly, the longer experimentation period aims to help developers deal with policy uncertainty while related regulations await review by authorities. It also gives developers more time to improve their products, reducing potential risks in commercializing new ideas.

Second, because the qualifications of fintech developers interested in the sandbox must be reviewed by a special committee, lawmakers are concerned about the composition of the committee and have requested that half of the committee comprise academics and experts.

On the one hand, lawmakers want the committee to review qualifications with objectivity, free from any interference from administrative agencies or established financial institutions. On the other hand, the draft welcomes more fintech developers to Taiwan, ensuring that promising innovation and creativity will not be stifled.

An important lesson from the legal framework created two years ago for third-party payment businesses is that legislation cannot provide all the answers for a fast-changing financial landscape, because it is such a time-consuming process.

In retrospect, the detrimental effect of bureaucratic indolence and legislative inefficiency in the process of pushing through legislation on third-party mobile payments only harmed domestic e-commerce operators, as their stronger foreign rivals were already knocking on consumers’ doors.

This time, there are promising signs of cooperation from both ruling party and opposition lawmakers in pressuring the Financial Supervisory Commission to move full-steam ahead on the sandbox legislation.

As the financial industry upgrades its infrastructure and provides new and more efficient services, there will be additional room for improvement and a demand for new technologies, such as big data, artificial intelligence and blockchain.

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