The Bangko Sentral ng Pilipinas (BSP), the Philippine central bank, has formally launched a regulatory sandbox, a year-long project that will allow banks and other financial institutions to test new products, services and technologies in a controlled environment.
Under the sandbox’s regulatory framework, interested participants from BSP-supervised financial institutions (BSFIs), BSFI third-party service providers and other qualified players will be allowed to offer financial products and services developed using new technology “to a limited number of customers in a controlled environment”.
“The BSP has always championed responsible innovation since we see it as a catalyst to promote efficiency in the financial system and expand financial inclusion,” says BSP governor Felipe Medalla.
After a 12-month period within the sandbox, during which participants will undergo a four-stage process involving application, evaluation, testing and exit stages, the BSP will determine whether the product or service is “fit for broader or mass adoption”.
In addition to allowing participants to explore the potential of new technologies without posing significant risks to the country’s financial stability or harming consumers, the BSP says insights from the regulatory sandbox projects will also inform the development of policies necessary to regulate the activities within and around new or emerging financial solutions.
With the sandbox, the BSP can achieve a “careful balance” between the perceived benefits of emerging technologies while managing attendant risks by providing a controlled environment for digital players to harness technology. “Moreover, this will promote a level playing field for relevant stakeholders who share the Bangko Sentral's goal of promoting the welfare of Filipinos by maintaining a safe, secure and truly inclusive financial system,” Medalla adds.
The BSP also will be accepting applications for a separate, simplified sandbox that runs on a shorter timeline. Unlike the main sandbox, this version is only open to BSFIs developing financial products or services that are already within the scope of existing regulations.
The two sandboxes are the latest in the BSP’s test-and-learn approach to regulation, which has been in place since 2004. Under this approach, the central bank was able to come up with some of the first mobile wallets and e-money regulations in the world and successfully implement the country's first cloud-based core banking system.