September, 2016
There is much abuzz over the global financial technology (“FinTech”) revolution, and Singapore, being the home of a number of innovative firms, is not exempt from it. With the proliferation of online currency and e-payment products such as Blockchain, Bitcoin, Apple Pay, PayPal, and crowdfunding sites such as GoFundMe, FinTech is no longer just for the banks, but also for the benefit of the average consumer. In response to increasing concerns over the potential to stifle FinTech innovation, the Monetary Authority of Singapore (MAS) has proposed a new “regulatory sandbox” initiative that will enable both financial and non-financial businesses to "experiment with FinTech solutions." We had a chance to speak with the seasoned Financial Services Regulatory lawyers at Shook Lin & Bok LLP about this new development in FinTech, and here is what they had to say.
Conventus Law: For those who are new to the term, what is FinTech, and why all the hype around it?
Shook Lin & Bok LLP: FinTech is short-form for Financial Technology, and generally refers to any technology solution that helps improve the manner in which financial services are delivered. There isn’t a precisely defined scope of coverage to the term, but it is commonly used in relation to the banking and payment services sectors.
CL: What is the aim of the MAS’s proposed FinTech sandbox initiative?
SLB: The authorities in general are keen to promote Singapore as a regional hub for FinTech. This is in line with Singapore’s existing position as an international financial centre. At the same time, one cannot afford to overlook the risks that are posed to users of financial services, particularly when novel technologies are involved. The MAS proposal for a regulatory sandbox regime is intended to strike a balance between these two competing considerations.
The regulatory sandbox will be a relatively insulated environment within which a financial institution will be allowed to experiment with a FinTech solution, while being subject to a less rigorous regulatory burden.
CL: What type of businesses will be interested in participating?
SLB: I would imagine that all sorts of businesses would have an interest. Given that the financial markets here are dominated by the large, brick and mortar financial institutions, my guess would be that applications for approval to operate a sandbox would initially be made by the large financial institutions who would partner with tech companies that have the particular Fintech idea.
CL: Will the ‘FinTech regulatory sandbox’ serve as a good compromise between the promotion of innovation and the need to regulate, and if yes, how?
SLB: That appears to be the idea. However, it may be too early to tell if the specific MAS proposals go far enough. For example, in the consultation paper for the regulatory sandbox, it is stated that regulatory requirements would be relaxed only for the duration of the sandbox, i.e., while experimentation of the FinTech solution is in progress. This presumably means that once the FinTech solution is ready to be rolled out to a wider market, the full regulatory regime would be restored. But what if experience during the sandbox period suggests that a particular regulatory requirement ought to be waived altogether. Would this be something that MAS is prepared to consider? Only time will tell, but certainly the proposals so far are a move in the right direction.
