The REGTECH Book

Legal Guidance for Entering the Sandbox and Taking Advantage of Cross-Border Cooperation Agreements

By James Burnie¹ and Andrew Henderson²

¹Senior Associate – Financial Services, Eversheds-Sutherland (International) LLP

²Partner – Financial Services, Eversheds-Sutherland (International) LLP

Background: The Genesis of the Sandbox

With financial market participants embracing the benefits of FinTech, for example in creating new types of revenue and saving costs, many financial regulators and lawmakers are recognizing FinTech’s inherent value. Perhaps uniquely, they are looking not only at how they should regulate FinTech, but also at how they can promote it. Of course, lawmakers, regulators, and market participants alike accept that FinTech is not without risk and may in reality introduce new risks. They need, therefore, to understand FinTech developments to ensure that FinTech does not become a means of subverting regulations and regulatory protection. Lawmakers and regulators like clear terms, but ‘FinTech’ is a vague concept, taking in a wide range of technologies. These range from simple automation of repetitive tasks to decentralized autonomous organizations (DAOs), which leverage smart contract and blockchain technology to organize complex networks. All of these carry risk, and regulators face a real challenge in understanding FinTech, particularly since the innovators who understand it best are more likely to be interested in creating new rather than monitoring existing ...