In April 2021, the Inter-American Development Bank (IADB) is set to announce a proposal that would create the first-ever Fintech regulatory sandbox across Latin America and the Caribbean. Titled “Towards the Creation of a Multi-Jurisdictional Regulatory Sandbox in Latin America and the Caribbean,” the project enables innovators to test new financial services or business models with real customers in controlled-experimenting environments.
There are three key benefits to these hubs:
- Big and small businesses spend fewer resources on government procurement and other burdensome procedures, freeing up more space to drive innovation and competition. Also, the hub allows regulators to understand first-hand how technology impacts financial markets.
- A regional regulatory sandbox places FinTech disruptors, established financial institutions, regulators and other stakeholders in the same platform, facilitating dialogue, information sharing and opportunities to channel harmonized approaches. The IADB draws from existing like-minded initiatives such as the ASEAN Financial Innovation Network, launched in 2018 by Asian financial regulators and the World Bank’s International Finance Corporation, and the Global Financial Innovation Network, founded in 2019 by the Financial Conduct Authority of the UK.
- It grants access to a single and accredited gateway that ensures local oversight. A key selling point to national authorities is that each jurisdiction crafts its own rules within the sandbox, arranged by non-binding cross-border agreements, usually through a Memorandum of Understanding.
The sandbox has enormous potential, but it is too early to draw conclusions. According to an IADB expert, only Brazil, Colombia, Mexico and Peru already have specific Fintech sandbox regulations, while for other countries this is still unexplored territory. More importantly, it is paramount to understand that governments across Latin America have competing financial ecosystems, individual policy priorities, distinct legal and regulatory frameworks and internal dynamics including those of political and cultural nature. Harmonizing regulation through sandboxes may be challenging; however, it is also a unique opportunity for the region.
Access Partnership is closely monitoring this initiative spearheaded by the IADB, which is part of the digitalization pillar of its “Vision 2025” strategy— a document set to be released during the Annual Meeting of the Boards of Governors of the IDB and IDB Invest on March 17 in Barranquilla, Colombia, and virtually. For more information regarding this matter or the IADB in general, please contact Yamel Sarquis at [email protected].
