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Budget: Sandbox Gift for FinTech Start-Ups

ASIC provides overview of proposed “regulatory sandbox” exemption for FinTech start-ups to be revealed in June.

The Government has reinforced its commitment to supporting Australia’s FinTech industry through the following announcements in the 2016-2017 Budget:

  • Regulatory sandbox – Confirming the not too distant release of a consultation paper by ASIC on the implementation of a “regulatory sandbox” which will enable the testing of new FinTech products and services.
  • Blockchain technology – Encouraging the exploration of blockchain technology through pilot testing and a study to be conducted by CSIRO’s Data61.
  • Funding – Commitment of $0.2 million in funding in the 2016-2017 financial year to promote Australia internationally as a FinTech destination.

On the back of the Budget announcements, ASIC has given a statement that it will release a consultation paper on its proposed “regulatory sandbox” exemption for FinTech start-ups in June. The proposed “regulatory sandbox” exemption will give FinTech start-ups a six-month window to test financial services without the requirement to obtain an AFSL. The exemption includes a number of proposed limitations, including:

  • the types of services that can be tested, including the products to which those services relate; and
  • limits on the number of retail clients that can be involved in the testing and a cap on the amount invested by each client.

In addition, start-ups relying on the exemption are still likely to be subject to a number of the general disclosure, conduct and compliance obligations faced by AFSL holders. For example, external dispute resolution scheme membership and professional indemnity insurance cover requirements.

As part of its consultation on the proposed “regulatory sandbox” exemption, ASIC will also seek feedback on how it can provide greater clarity and guidance in respect of the skills and experience required to successfully obtain an AFSL or ACL and proposals for flexibility in relation to these skills and experience requirements.

This will be an interesting space to watch, in particular, the balance reached by ASIC through limitations placed on the “regulatory sandbox” exemption as a consumer protection measure versus, supporting the FinTech start-up industry by making the exemption more broadly available.

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