Securities and Exchange Board of India Launches Regulatory Sandbox for Fintech Firms

India’s financial technology sector is expanding rapidly, which has led to SEBI, the nation’s financial market regulator, to launch a regulatory sandbox. The sandbox program will assist local Fintech firms with testing out new products and services with a small group of users before introducing them to the general public.

The Securities and Exchange Board of India (SEBI), which regulates India’s securities market and is owned by the nation’s government, released its regulatory sandbox on May 20, 2019. The program aims to create guidelines that encourage the development of innovative Fintech platforms in India’s securities and equities market.

The Indian securities regulator had stated last year:

“SEBI is proposing an ‘Innovation Sandbox’, which would be a testing environment, where Fintech firms and entities not regulated by SEBI, including individuals, could test their proposed solutions offline, isolated from the live market, subject to fulfillment of the eligibility criteria, based on market-related data made available by stock exchanges, depositories, and qualified registrar and share transfer agents (QRTAs).”

Following a board meeting on February 17, SEBI noted that it would let the registered (or licensed) market participants test their products and services on a small group of users for a set time period with flexible guidelines.

At first, all SEBI-licensed companies will be able to take part in this type of “regulatory sandbox,” which is a live testing environment that allows users to check out processes associated with new products. The regulatory sandbox also lets users test out business models on a small group of customers. SEBI’s representatives noted that they were using a cross-domain approach for the regulatory sandbox in order to accommodate companies that may not be registered.

Fintech firms and other entities that are not regulated by SEBI may also take part in the regulatory sandbox in the future. However, firms that have not registered will not get any exemptions from the current investor protection framework, know-your-customer (KYC) and anti-money laundering (AML) guidelines.

The regulatory sandbox is meant to serve as a testing framework for new business ideas and emerging technologies that could potentially help investors, India’s capital markets and the nation’s economy.

SEBI says that adopting the latest Fintech could help in promoting a more efficient, equitable and transparent financial ecosystem.

The Reserve Bank of India has also introduced a regulatory sandbox for Fintech firms that falls under its jurisdiction.



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