The regulatory sandbox is a mechanism that allows for controlled and limited testing to be performed, under the supervision of competent authorities (CNMV (Securities Market regulator), Banco de España (the Bank of Spain) and Dirección General de Seguros (the Directorate-General for Insurance and Pension Funds), to analyse the feasibility of new business models or the use of new technologies when providing financial services.
Legislation and Relevant Information
Spanish Law 7/2020, of 13 November, on the digital transformation of the financial system (the Sandbox Law) was passed with a double purpose. On the one hand, to contribute by providing suitable instruments to the financial authorities to appropriately fulfil their purposes within the current digital context and, on the other hand, to facilitate the innovation process in such a highly competitive international technology environment.
The core element to this regulatory framework is the sandbox, or controlled testing area, as a set of provisions safeguarding the controlled and limited testing of a project that can provide technology-based innovations applicable to the financial system.
The controlled testing area is governed by a protocol-law scheme. The regulatory framework applied to the controlled testing area is formed by the provisions established in the regulations – that establishes the general regime, including rights and obligations – and by a test protocol containing the specific regime for each test and which will be approved by the authorities in charge of following up the tests and the project owners.
How to Access the Sandbox
The Sandbox Law envisages two annual cohorts (in March and September) for sponsors to request their access to the controlled testing area. The period for each cohort is published on the website of the Secretaría General del Tesoro y Financiación Internacional (Secretariat of the Treasury and International Financing). The interested parties must submit their request within the period via the website virtual office of the SGTFI, attaching an explanatory report in accordance with Article 6 of Law 7/2020.
Status of the Accepted Projects
The controlled testing area is divided in the following stages:
Submission of applications: the interested party can submit the request via the website of the Treasury during the 30 working days of the period established by resolution of the Treasury, which will be published on its website.
Prior assessment: once the period for acceptance of applications concludes, the supervisory authorities have one month, which may be extended an additional month, to assess the applications submitted. The Treasury will publish the list of projects provisionally accepted on its website.
Protocol negotiation: the sponsors of the projects accepted and the supervisory authorities will commence the negotiation of the protocol, which details the conditions under which the tests are to be carried out, such as their duration, the participants, the aspects to be tested, the possible risks and their mitigation or the guarantees provided, and the supporting documentation.
Testing period: the informed consent of the participants must be collected before commencing the tests and, where applicable, the guarantees must be activated. During the tests, the sponsors will provide the documentation established in the protocol and the CNMV will monitor their development.
Once the tests conclude, the sponsors will draft a result assessment report and the CNMV will publish a report on the conclusions reached.
Please contact us if you have any queries regarding the procedure or the Sandbox entry requirements, or if you wish to make any enquiry regarding the project before submitting a request by sending an email to the Fintech Innovation hub at email@example.com