New SEC Sandbox Could Offer Regulatory Relief for Crypto Firms — Fintech Lawyer

Editing and additional information by Michael Mislos

The Philippine Securities and Exchange Commission (SEC) introduces the SEC Strategic Sandbox (SEC Stratbox) to promote innovation in financial products and services. 

This regulatory tool aims to boost competitiveness, enhance collaboration, and stimulate the development of a vibrant digital economy in the Philippines.

What is the Stratbox?

The SEC Stratbox is a regulatory tool that facilitates the testing of innovative financial products and services in a controlled environment. 

• Its goals are to increase competitiveness, enhance collaboration among regulators, innovators, and stakeholders, and stimulate the development of the digital economy in the Philippines.
• It serves as a controlled environment where firms can test innovative financial products and services under proper regulatory oversight.
• It provides a platform for firms to explore new technologies, test their products or services in a live setting, and eventually adopt these technologies to enhance the financial market.

Moreover, the Stratbox enables collaboration among regulators, innovators, and other stakeholders in crafting and refining regulations and policies related to emerging technologies. This initiative aims to foster innovation, promote competitiveness, and contribute to the development of a dynamic and inclusive digital economy in the Philippines.

Beneficial to Crypto Companies?

As explained by Atty. Rafael Padilla, author of Fintech: First Laws and Principles:

“The Philippine SEC issued today new rules for strategic sandbox (StratBox). If allowed by the SEC to play in the #sandbox, the participant may be granted regulatory relief, subject to certain conditions. This means that the SEC can relax specific licensing, registration, compliance, or other regulatory requirements during the sandbox period.”

Atty. Rafael Padilla, Author, Fintech: First Laws and Principles

He further notes that while the new sandbox regime is available to all fintech intermediaries, the StratBox will be particularly useful for the following:

• crypto intermediaries dealing with securities-related transactions 
• crypto lenders (i.e., lenders who accept cryptoasset as collateral)
• new digital lenders that are currently barred from registering as an online lending platform (OLP) due to an indefinite moratorium issued by the SEC in 2021

This flexibility provided by the Stratbox can significantly impact firms, especially those operating at the intersection of technology and financial services, Padilla said.

How does it work?

Firms interested in participating in the Stratbox must submit their proposals to the SEC, outlining their ideas and plans for testing. Once approved, these firms are granted permission to operate within the sandbox, where they can test their products or services under regulatory oversight.

During the testing phase, firms gather data and feedback, which is used to evaluate the viability and impact of their innovations. Throughout this process, the SEC works closely with participants to ensure compliance with existing regulations and to address any potential risks or concerns.

Firms and organizations involved in the financial sector, including startups, fintech companies, financial institutions, and other relevant entities, can apply to participate in the SEC Stratbox. The SEC will evaluate the proposals based on various criteria to determine eligibility for participation in the program.

Criteria for Applicants

The SEC Stratbox criteria for participation, as outlined in the media release, encompass several key factors. Applicants are required to propose innovative financial products or services aimed at improving the efficiency, accessibility, or inclusivity of the financial sector.

Additionally, they must demonstrate the viability of their proposed innovation with a clear business model and potential for success in the market. Compliance with relevant regulations, prioritization of consumer protection, and effective risk management are also essential.

Moreover, the innovation should contribute to the economy’s growth and development, potentially creating jobs, fostering competition, or promoting financial inclusion.

This article is published on BitPinas: To Drive Financial Innovation in PH, SEC Introduces StratBox

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