Last year I proposed that Poland should take a broader approach to the issue of regulatory sandboxes, not merely copying solutions adopted in other countries. Now we see the first steps towards creation of multi-sectoral (not exclusively financial) regulatory sandboxes.
The trend started by the Financial Conduct Authority in the UK of creating regulatory sandboxes for the financial sector has spread around the world, including Poland. Although many voices from major jurisdictions, such as the United States and Germany, are skeptical, this solution undoubtedly has its advantages. Market participants usually rate this concept very highly, even if in reality the sandbox does not deliver immediate regulatory benefits (for example, it does not enable limited operation of regulated activity without a licence, which would be difficult in EU member states due to the harmonised regulatory regime).
Traditionally, the organisers of regulatory sandboxes are financial market authorities. This makes a lot of sense, as financial markets are a closely regulated sector in which safe development of innovations may require a special approach. But if we perceive value in the sandbox approach to financial technology, why not try this method in other industries as well?
This seems to be the assumption adopted by the FCA in its consultation document entitled “Cross-Sector Sandbox.” In the FCA’s view, the challenges connected with rapid growth of innovation are not unique to the financial sector, but are evident in other industries such as transportation and healthcare. For this reason, the FCA decided to conduct preliminary consultations with other regulatory bodies in the UK responsible for areas such as gambling, data protection, telecommunications, and energy.
The FCA does not propose immediate establishment of a new, multi-sectoral sandbox. The consultation document lists both the perceived advantages and drawbacks of such a project. A clear advantage is appropriate regulatory response to complex new multi-sectoral business models. The possibility for sharing knowledge among numerous bodies and more efficient regulatory processes for firms are also identified as advantages. The defects identified include the unknown demand for such a project among market participants, the varying scope of activity of the different authorities, and displacement of firms in developing knowledge. Thus the FCA requests market participants to provide information and opinions on the project. The cross-sector sandbox as such as defined quite broadly as “a single-point-of-entry sandbox for firms to test innovative propositions with multiple UK regulators, in a controlled environment.”
It is therefore uncertain whether the cross-sector sandbox will be established at all, and what exactly it would look like. Regardless of how this idea is assessed, it undoubtedly represents an attempted regulatory response to the increasingly complex process of development of innovations, which often does not follow the beaten legal path in specific industries.
If we are serious about the growth of innovation in Poland, we should closely follow the debate in the UK, and more importantly, launch a domestic debate on this topic. Otherwise we will be condemned to copying ideas from abroad, which does not bode well for the future of innovation in Poland.