The National Monetary Council (CMN) and Banco Central do Brasil (BCB) established the guidelines for the operation of the ‘Controlled Tests Environment for Financial and Payment Innovations’ (Regulatory Sandbox). The regulation also provides for the conditions for the supply of products and services tested under this environment’s framework, within the scope of the National Financial System (SFN) and the Brazilian Payment System (SPB).
„While preserving the security and efficiency within the domestic financial and payment systems, the implementation of the Regulatory Sandbox aims at promoting the entry of innovative business models, competition, financial inclusion, as well as enhancing the BCB’s supervision processes,” according to the press release.
Regulatory Sandbox is an environment in which entities from the financial or payment industries will be licensed to test, for a specified period, an innovative solution — under a specific set of regulation that controls and delimits its activity. To be considered an innovative project, the experiment has to employ technological innovation or promote alternative use of existing technology; and bring improvements to the financial industry, such as gains of efficiency, coverage or capillarity, cost reduction or increased security.
To be licensed to operate within the BCB’s Regulatory Sandbox environment, the institutions — in addition to carrying out their transactions with integrity, reliability, security and confidentiality — must comply with the regulation on the prevention of money laundering and combat of the financing of terrorism and the handling of complaints of their clients and users.
Moreover, the institution licensed to test a product/service has to disclose for its customers that its products and services are being offered within the scope of the Regulatory Sandbox.
During the Regulatory Sandbox’s testing period, the new products or services are subject to specific requirements. Accordingly, BCB will monitor results and when detected that the participant’s activities may pose excessive risks to the SFN, SPB or to their clients or users, it may establish limits and additional criteria — aiming at mitigating risks to the SFN and to the SPB associated to the innovative project under analysis. On the other hand, if the experiment is successful, the CMN or BCB may adapt the regulation framework, in order to allow the regular provision of these innovative products or services.
The Regulatory Sandbox will be operated through cycles, whose lengths are defined by BCB, limited to one year — with the possibility to be extended once for the same period. The first cycle is scheduled for 2021. It should be noted that the BCB’s license to participate in the Regulatory Sandbox does not imply necessarily a guarantee that the participant will receive a definitive license from BCB to operate.
The Agenda BC# pursues the removal of prevailing barriers that disturb the SFN to fulfill its role of promoting an efficient resource allocation across economic activities. Several innovations driven by technology encourage competition. On the other hand, challenges related to reducing barriers, simplifying procedures and managing risks must be taken into consideration.
The implementation of the Regulatory Sandbox is an action encompassed by the Agenda BC#, under the Competitiveness Dimension, which seeks to promote adequate pricing by favoring competitive access to markets.
„Tendinţele pe care le-am remarcat înainte de începerea pandemiei s-au accelerat pe perioada stării de urgenţă. Am văzut acest lucru ca o oportunitate, un tipping point pentru bancă. Post-pandemie nu avem cum sa ne întoarcem la comportamentul financiar pe care îl aveam până în februarie a.c. Relaţia românilor cu online-ul s-a schimbat. In plus, cardul fizic se va dematerializa. Vom asista la o scădere a cererii pentru cardurile fizice, respectiv la o creştere a preferinţei pentru componenta digitală a acestora.”