New ‘FinTech Regulatory Sandbox’ Proposed for Malta as Part of a new FinTech Strategy

The MFSA published a consultation document called ‘MFSA FinTech Strategy – Harnessing innovation through technology’ (the ‘Strategy’) which sets out the Authority’s vision ‘to establish Malta as an international FinTech hub which supports and enables financial services providers to infuse technology in product and service offerings to drive innovation’. The purpose of the Strategy is to enable key FinTech players, including but not limited to, start-ups and financial services incumbents, to develop innovative solutions or provide enhanced access to financial products. The Strategy is based on the successful implementation of various initiatives across six strategic pillars, namely regulations; ecosystem; architecture; international links; knowledge; and security.

Following in the footsteps of the Malta Gaming Authority (MGA) that had successfully implemented a sandbox for the use of DLT and the acceptance of virtual currencies within the remote gaming sector, the MFSA is now proposing a ‘FinTech Regulatory Sandbox’ which would provide entities ‘the space to operate in a controlled but fully functional services environment in which innovative new products, services, business models and delivery mechanisms can be tested, monitored and enhanced’. Whilst rigorous regulatory requirements are laudable and encouraged to safeguard the integrity of the financial services sector and related areas such as DLT, it will certainly be exciting to see to what degree of flexibility innovators will be allowed to operate in the proposed FinTech sandbox environment without being dissuaded by overregulation. In this regard, it is noteworthy that the MFSA has recognized regulatory proportionality as a strategic priority especially in relation to start-ups and other smaller, less complex entities.

Link to Document: https://www.mfsa.com.mt/wp-content/uploads/2019/01/MFSA-Fintech-Strategy-visual.pdf