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One of the Central Bank’s objectives, as mandated by the Central Bank Law is to organise Licensed Financial Activities, establish the foundations for carrying them on, and determine the standards required for developing and promoting prudential practices in accordance with the provisions of the Central Bank Law.

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A regulatory sandbox is a supervisory tool which enables its Participants to test innovative business models, products and services in relation to financial services within a defined space and duration and subject to appropriate regulatory oversight and supervision, to ensure the best outcomes for all stakeholders (the “Regulatory Sandbox”).

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The Sandbox Conditions Regulation lays down the Conditions established by the Central Bank for exempting from the requirement to obtain a Licence all persons who wish to test innovative business models, products and services in relation to Licensed Financial Activities. Such testing will be conducted within a defined space and duration and is subject to appropriate supervision by the Central Bank throughout the testing period, to ensure the best outcomes for all stakeholders. The purpose of these Conditions is to enable a Participant to understand how best to structure its business in a regulatory compliant manner, whilst also enabling the Central Bank to understand the impact of such Participant’s activities on the pursuance of the Central Bank’s objectives, via exercising supervisory tools such as monitoring and oversight.

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The performance of Licensed Financial Activities requires a person to apply to the Central Bank for a Licence to operate as a Licensed Financial Institution. The Conditions provide an alternative route to undertake Licenced Financial Activities on a time-limited basis and subject to the requirements specified herein and any other requirements established by the Central Bank. The Central Bank relies upon its powers in Article (64)(4) of the Central Bank Law to exempt certain activities and practices from the requirement to seek a Licence to carry on or promote Licensed Financial Activities.

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The Conditions are issued pursuant to the powers vested in the Central Bank according to Article (67) of the Central Bank Law.

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In order to ensure appropriate regulation and supervision, the Central Bank will mandate that any successful Applicant to the Regulatory Sandbox meets minimum eligibility criteria and complies with ongoing regulatory and supervisory obligations, and any additional criteria and obligations, as the Central Bank determines, in its sole discretion. Throughout the duration of their participation in the Regulatory Sandbox, Participants will be required to engage with the Central Bank via an assigned case supervisor. This will enable both Participants and the Central Bank to understand the key areas of regulatory impact on the proposed business. At, or towards the end of the duration of the Regulatory Sandbox, Participants will either be subject to a streamlined procedure to obtain a Licence, with assistance from the Central Bank to determine the required enhancements, if any, to their governance, structure, operations, systems and controls, amongst other things; or otherwise be asked to cease all or part of their business depending on the Central Bank’s determination of the business’s impact on the Central Bank’s objectives. Notwithstanding the foregoing, the Central Bank may require any Participant to cease all or part of its business in the Regulatory Sandbox, at any point during its participation in the Regulatory Sandbox.