Regulatory Sandbox: A Testing Ground for Financial Technology Innovation

Recently, the Hong Kong Securities and Futures Commission announced that cryptocurrency exchanges would be included in the "Regulatory Sandbox", a move that has once again drawn industry attention to the "Regulatory Sandbox".

The concept of "Regulatory Sandbox" was first proposed in the UK in 2015. It provides fintech companies with a relatively relaxed environment to test innovative products and services on a small scale, while regulators can also explore regulatory approaches suitable for financial innovation. This model has been widely adopted globally, with several countries establishing regulatory sandboxes for cryptocurrencies and virtual finance.

China is also actively exploring this field. In addition to Hong Kong, cities such as Ganzhou in Jiangxi, Taizhou in Shandong, Hangzhou in Zhejiang, and Guangzhou and Shenzhen have made relevant attempts. Among them, the practices in Ganzhou and Hong Kong are the most noteworthy.

In July 2017, the Gan Zhou Blockchain Financial Industry Sandbox Park in Jiangxi Province was launched, marking the first government-led blockchain "Regulatory Sandbox" in mainland China. The park encourages the settlement of innovative enterprises in blockchain technology and financial applications, and provides policy support. Currently, the park has built a 25,000 square meter industrial park and has formulated a series of relevant policies.

Hong Kong's approach is closer to international standards. The Hong Kong Securities and Futures Commission plans to explore the operations of cryptocurrency exchanges in two phases to determine whether to bring them under regulatory oversight. This process is expected to take at least 12 months.

However, some cities in China are using the banner of "Regulatory Sandbox", but in reality, they resemble traditional industrial parks. For example, Shenzhen, Qingdao, and Hangzhou have similar attempts, but these projects often lack direct involvement from government regulatory agencies, making it difficult to truly call them a "Regulatory Sandbox".

A true "Regulatory Sandbox" should connect fintech innovation companies and government regulatory departments on both ends, jointly exploring new policies suitable for fintech innovation. The physical space is not the core; the key lies in regulatory innovation.

Currently, the "Regulatory Sandbox" practices in most cities in China are still at the level of industrial parks, which has limited practical significance for promoting the coordinated development of regulatory mechanisms and financial technology innovation. Although it cannot be ruled out that the industry autonomous organizations leading the industrial agglomeration may generate effective self-regulatory norms, thereby influencing regulatory policies, it is still difficult to achieve this goal based on the current operational situation of blockchain industrial parks.

In the future, as China promotes the practice of "Regulatory Sandbox", it needs to pay more attention to regulatory innovation itself, rather than just industry aggregation. Only by truly achieving a positive interaction between regulatory agencies and innovative enterprises can the role of the "Regulatory Sandbox" be fully realized, promoting the healthy development of financial technology.