Further to the positive feedback received by stakeholders on the FinTech Strategy, the Malta Financial Services Authority (MFSA) has issued Pillar 1 – Regulations Consultation Document.
This document features an update on the status of the strategic objectives under Pillar 1 of the FinTech Strategy, being proportionality and smart regulations. It delves into great detail with regards to the Regulatory Sandbox, in order to encourage FinTech innovation.
The main targets of the Sandbox are to support sustainable financial innovation and to reduce regulatory uncertainty. Participation within the Sandbox requires applicants to meet certain mandatory eligibility criteria. This is being proposed in order to ensure that only proposals which truly merit the use of the Sandbox are selected. The following are the Sandbox Eligibility Criteria:
- The proposal must be innovative or significantly different from current solutions;
- The proposal must have a genuine need for testing in the Sandbox;
- The applicant must set-up clear objectives and parameters;
- The proposed solution must offer an identifiable and direct benefit or indirect benefit to consumers.
The document goes into the legal framework which should regulate the Regulatory Sandbox, and the structure which the Sandbox should be given. MFSA is proposing to make use of:
- Bi-annual cohorts, whereby the Sandbox will accept calls in traches where entities may apply to conduct their respective tests on a cohort basis of two six-month test periods per year; and
- Special purpose cohorts, wherein the Sandbox will be open on an ad-hoc basis to tackle specific FinTech solutions and/or challenges.
Moreover, the document goes into the Sandbox Lifecycle, which shall be made up of 6 stages, being:
- Proposal Stage
- Selection Stage
- Application Stage
- Sandbox Testing Stage
- Sandbox Testing and Evaluation Stage
- Sandbox Exit Stage
The document then goes into detail with regards to each stage of the Lifecycle.
Finally, the document features proposals concerning RegTech and SupTech. The Authority is seeking solutions for RegTech, in order to enhance regulatory processes with the aim of helping authorised entities to comply with greater certainty and more efficiently to regulatory and supervisory requirements. The MFSA is also actively working on harnessing the benefits of technology and digitisation and embracing regulatory innovation itself through investment in SupTech.
Before proceeding with detailed proposals on the implementation of the regulatory initiatives presented in the Consultation Document, the Malta Financial Services Authority is seeking feedback from the industry.