The law on the digital transformation of the financial system (sandbox) has been approved

The law on the digital transformation of the financial system (sandbox) has been approved

What is “sanbox”? On November 15, Law 7/2020 for the digital transformation of the financial system came into force. With this regulation, Spain is committed to technological innovation in the financial sector and opens the doors to the creation of ‘sandboxes’, providing a great opportunity to those financial operators who wish to start up innovative projects.

What is the ‘sandbox’ and requirements to access the ‘sandbox’:

The ‘sandbox’ is a testing ground through which the suitability or otherwise of a certain financial service is evaluated, due to the technological innovation it represents, does not yet have applicable regulations. That is why during the tests, the only regulations that will be mandatory for them are those developed by the ‘’Law for digital transformation of the financial system’’. In this way, the Act establishes in the first place a series of requirements to be able to access the ‘sandbox’:

• Any innovative project applicable in the financial system may request access.
• The project that is presented must be sufficiently advanced, in such a way that it offers a minimum functionality to verify its usefulness during the testing period.
• It will be necessary to provide added value. Thus, projects similar to others that have been interrupted for reasons motivated in the last two years will be rejected.
• In addition, the impact that the project could have on the Spanish financial system will be taken into account.

Objectives:

Two main objectives to which the legislator has sought to respond must be highlighted:

• Position Spain as one of the benchmark countries in the field of Fintech regulation.
• Allow technological innovation in the financial sector to be carried out through
  the appropriate instruments and with the corresponding supervision of the authorities.

Written consultations:

One of the most applauded points of the regulation is the possibility that it offers promoters to make written consultations to the supervisory authority, which will have a period of two months to answer, although the silence cannot be interpreted as an affirmative answer.

The answer will have binding effects when it is established in its specific legislation, being only informative in the rest of the cases.

Interruption, exit regime and post-test effects:

The project testing period may be interrupted at any time for reasons by both the promoter and the supervisory authority if it detects any breach.

Once completed or during its on development, and always in accordance with the provisions of the protocol, the promoter may request authorization to start the activity or to expand it. In addition, it would be possible to reduce the time limits for obtaining the corresponding authorization when the authorities consider that the information and knowledge acquired during the tests allow a simplified analysis of compliance with the requirements provided for in the current legislation.

Responsibility of the promoter:

The responsibility for the damages suffered by the participants will be exclusively the promoter when they occur due to a breach of the protocol, arise from risks not reported by him or when there is fault or negligence on his part. Also in case of damages derived from technical or human failure the responsibility will be the promoter.

Entry into force: Although the regulation came into force on November 15, the application form must be approved by the General Secretariat of the Treasury and International Financing within a month.