Singapore wants a regulatory sandbox for fintech. Here’s what it could look like.

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People nodded in vigorous approval when the Singapore government recently talked about creating a “regulatory sandbox” for fintech.

“You will not be smothered by regulations; until you become big enough to actually be a threat to the financial system, but at that point you would already be considered a success,” said Vivian Balakrishnan, the minister in charge of Smart Nation.

Sounds forward-thinking, but the devil always lies in the details.

Now, we have a glimpse at what those details are. The Monetary Authority of Singapore (MAS) yesterday took a step closer towards building the sandbox by releasing a consultation paper detailing what it could look like.

It’s now seeking feedback on the guidelines, of which I present a summary:

Fintech startups or financial institutions must apply to create a sandbox.

Whether you are a bank or a fintech startup, every applicant must be approved by the MAS. Also, there isn’t one sandbox for the entire industry but many sandboxes customized to each applicant.

Not all sandboxes will be the same.

For each sandbox, MAS will decide which regulations to relax and which to uphold. The applicant will be in charge of operating the sandbox and creating safeguards to limit the consequences of failure.

Not all sandbox applications will be approved.

MAS will decide who gets a sandbox. Yours may not get approved if:

• Your fintech product isn’t innovative or beneficial to society.
• You have not done “due diligence to test and verify the viability” of your product. Such due diligence includes testing your product in a lab environment or getting external validation.
• Your product doesn’t require a sandbox to be tested effectively.
• You have no intention to deploy your product in Singapore on a broader scale after exiting the sandbox.

You can request to extend the duration of your sandbox.

Just submit an application one month before your sandbox expires.

MAS can stop the deployment of your product after the sandbox expires.

Once the sandbox disintegrates, you can be barred from deploying your product, on certain conditions:

• Both you and MAS agree that the test objectives have not been achieved.
• You cannot fully comply with laws and regulations.
• A critical flaw has been found in your product that couldn’t be fixed when the sandbox was still active.
• You’ve breached the limits of the sandbox.

The approval process could take more than a month.

MAS outlined what the approval process could look like:

Not all financial regulations can be relaxed in the sandbox.

Should MAS determine how innovative a fintech product is?

It’s easy to skirt around the requirement of deploying your product in Singapore.

Is the approval process too cumbersome?