It has been five years since the UK Financial Conduct Authority pioneered the idea of a regulatory sandbox in the financial sector—a controlled space with relaxed rules, in which businesses can test and validate innovative products, services and business models with the support, and under the close supervision, of an authority for a limited period of time. Since then, many jurisdictions worldwide have enthusiastically copied the concept in multiple variations, depending on their respective needs and capabilities. However, supra-national institutions like the European Union have been reluctant to endorse the idea so far.
This may now be about to change though. In September 2020, the European Commission published a Digital Finance Package including a so-called DLT Pilot Regime, which is in effect a regulatory sandbox for certain providers of distributed ledger technology (DLT) and blockchain services. Following consultations with various stakeholders and national authorities, the Commission concluded that the use of DLT in finance was worth supporting, and that the application of the current regulatory framework to DLT-based business models poses a number of significant problems. With the establishment of a regulatory sandbox, it hopes to reconcile those two conflicting findings. For the complicated multi-level legal framework of the European Union, this proposal represents unchartered territory and is a landmark decision…
Source: Oxford Business Law Blog
Read the full post by W.-G. Ringe and C. Ruof here.