The Monetary Board approved the Regulatory Sandbox Framework, which formalizes the Test and Learn (T&L) approach, a system that allows BSP Supervised Financial Institutions (BSFIs), third-party service providers of BSFIs, and new players to offer financial products and services using new technology to a limited number of customers in a controlled environment.
The Framework enables the participants in the sandbox to explore the potential of new technologies without posing significant risks to financial stability or harming the consumers.
Bangko Sentral Governor Felipe M. Medalla pointed out, “The BSP has always championed responsible innovation since we see it as a catalyst to promote efficiency in the financial system and expand financial inclusion. We are deeply committed to ensuring that attendant risks in using new technologies are effectively managed through enabling and responsive regulations.”
Under the Framework, each sandbox shall undergo a four-stage process, namely, Application, Evaluation, Testing, and Exit Stages. The sandbox project will run for 12 months and after the said period, the Bangko Sentral will determine whether the sandboxed product/service is “fit for broader or mass adoption”.
Insights from the regulatory sandbox projects will inform the development of policies necessary to regulate the activities within and around new or emerging financial solutions.
Applicants for regulatory sandbox experiments may also be advised to use a simplified approach known as the “Regulatory Sandbox Lite”, which runs on a shorter timeline. This approach is only available to BSFIs involving financial products or services that are already within the scope of existing regulations.
The Bangko Sentral has adopted the T&L approach since 2004, which gave rise to one of the first mobile wallets and e-money regulations in the world and brought about the successful implementation of the country’s first cloud-based core banking system.
Governor Medalla emphasized that with the Regulatory Sandbox Framework in place, “We can achieve a careful balance between the perceived benefits of these emerging technologies while managing attendant risks by providing a controlled environment for these digital players to harness technology and probe the limit of what’s possible. Moreover, this will promote a level playing field for relevant stakeholders who share the Bangko Sentral’s goal of promoting the welfare of Filipinos by maintaining a safe, secure, and truly inclusive financial system.”