Acting for You, July 2017

Regtech, fintech and a regulatory sandbox

ASIC is seeking feedback on its current and proposed future approach to regulatory technology. In its Report 523 ‘ASIC’s Innovation Hub and our approach to regulatory technology,’ ASIC provides an update on the work of its Innovation Hub and outlines its approach to financial technology, regulatory technology and related areas.

In March 2015, ASIC launched an Innovation Hub to help financial technology (fintech) businesses navigate Australia’s regulatory system in the financial services sector without compromising investor and financial consumer trust and confidence. The Innovation Hub helps fintech businesses by providing access to senior staff at ASIC to streamline licensing and by offering informal guidance to help bridge any knowledge and resourcing gaps. Key ASIC initiatives driven by the Innovation Hub include engagement with international regulators (through regular meetings and the signing of cooperation agreements) and the ‘regulatory sandbox’ framework.

Since its inception, the Innovation Hub has worked with 168 entities — 125 of which have received informal assistance. Since March 2015, ASIC has granted 33 new Australian financial services licences and Australian credit licences and ten variations. ASIC believes that engaging with new fintech businesses via the Innovation Hub enables those businesses to achieve their licensing materially faster.

The Innovation Hub taskforce also plays an important coordination role in ASIC’s new policy work relating to innovation, including on equity-based crowd-sourced funding. An initiative driven by the Innovation Hub to assist fintech businesses has been the creation of a ‘regulatory sandbox’ framework — essentially a ‘lighter touch’ regulatory environment — to enable the testing of innovative business models. Launched in December 2016, the regulatory sandbox framework is currently being presented to the fintech sector in Australia and is being used by one entity. Governance Institute lodged a submission on the proposed regulatory sandbox provisions in July 2016.

ASIC’s regulatory sandbox framework is based on additional guidance and a limited licensing exemption. It comprises three broad options for testing new innovative products or services:

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