HK regulators announce fintech sandboxes

HK regulators announce fintech sandboxesThe HKMA, the Securities and Future's Commission (SFC) and the Insurance Authority have each announced new regulatory sandboxes designed to encourage the development of fintech services and companies in the city.

The SFC announced it has launched a sandbox to provide a confined regulatory environment for either licensed corporations or startups to identify any regulatory risks or concerns before their services are provided to the wider public.

In the sandbox environment, qualified companies will be under closer SFC monitoring, and the SFC may impose licensing conditions such as limiting the types of clients companies can serve to minimize risk exposure to investors.

“The SFC recognizes that firms utilising innovative technologies may broaden investor choice and benefit the Hong Kong financial services industry,” SFC CEO Ashley Alder said.

“For the sake of market integrity and better investor protection, the sandbox provides a confined regulatory environment for qualified firms to demonstrate the reliability of their fintech solutions as well as their internal control systems at the initial stage.”

The HKMA has meanwhile unveiled an upgraded Enhanced Fintech Supervisory Sandbox (EFSS) 2.0, which will include a fintech supervisory chatroom to provide fast feedback to companies in the early stage of fintech projects.

Tech companies can also secure direct access to the sandbox by seeking feedback from this chatroom without going through a bank as an intermediary.

The regulator first launched the EFSS in September last year.

Finally, Insurance Authority has launched a pilot Insurtech Sandbox to help authorized insurers experiment with new Insurtech and other technology applications without needing to fully comply with the usual regulatory requirements.

All three sandboxes will be linked up to provide a single point of entry for pilot trials of cross-sector fintech products

"The Hong Kong regulators’ decision to launch these sandboxes shows their determination to support the development of fintech in the city, and is a compelling reason for fintech start-ups from overseas with an eye on the mainland China and Asia markets to base themselves in Hong Kong,” InvestHK head of fintech Charles d'Haussy commented.

“The sandboxes will benefit many of Hong Kong's key FinTech areas, such as blockchain, cyber security, regtech, insurtech and more. The regulators' initiative is sure to be widely discussed during the upcoming Hong Kong Fintech Week, which runs from 23 to 27 October.”