Digital Civil Society Lab

Regulatory Sandboxes in FinTech for Financial Inclusion



How can we harness the potential of new technology such as big data, machine learning and artificial intelligence to remedy current economic inequities, that are in large part caused by the legacy of racial discrimination and exclusion from the financial services marketplace?

Background: One increasingly popular answer to this question is the Regulatory Sandbox. The aim of this research project is to create a roadmap of Regulatory Sandboxes, both in theory and practice. These sandboxes can take many forms, and can be created at either the state or federal level. In general, a sandbox is an agreement between a regulator and an individual company or firm that allows for certain carve outs from current oversight or the issuance of no-action letters from, for example, disclosure requirements, disparate impact liability, and/or fair lending requirements. These agreements are individualized, but generally are entered into on the premise that these arrangements are needed to spark innovation to drive financial inclusion and credit access. The sandbox is held out as the necessary “safe space” for firms to innovate without fear of legal liability.

Relevant Policy and Legal Questions: There are a host of opinions, both in support of and critical of, sandboxes. Many consumer advocates have expressed grave concerns that these sandboxes evade the Administrative Procedure Act, are based on questionable legal authority, and compromise the integrity of long-standing civil rights and fair lending laws. Many businesses are wary of the efficiency of sandboxes to truly protect them from potential liability, however many program proponents hold that without a space for innovation free from the fear of legal liability or regulatory blowback, we are missing a historical opportunity to harness technology and big data to solve long standing economic inequity. Because sandboxes are so new, and there is a paucity of data on program participants, there are more questions than answers about the future of sandboxes at this point. What is unequivocal is that there is a lack of a comprehensive understanding on how sandboxes are perceived and critiqued by the broader legal, policy and academic landscape. Even more absent is a broad and informed comprehensive roadmap of sandboxes available for Congressional staff, as many Members are expressing interest in learning about sandboxes. As sandboxes continue to gain momentum on the state level, a roadmap is increasingly needed to ground a comprehensive multi-stakeholder dialogue about the future of sandboxes.


The focus of this project will be to develop a policy white paper, with the input of various stakeholder on Capitol Hill, industry leaders, and consumer advocates to serve as a template policy document sandboxes, including legislative text. The composition of the white paper would involve expert interviews, policy summarization, legislative text drafting, work with conveners to assemble roundtables and gatherings, as well as consultant editors to review submitted drafts. 

Presentation to Financial Innovation Network Meeting

Download a copy of the project presentation, made in Toronto at the Financial Stability Board, semi-annual Financial Innovation Network Meeting (FIN). The FIN is a group of about 50 innovation experts from central banks, ministries of finance and regulators from around the world (G20 countries, major financial centres, and international organizations). The FIN monitors developments in FinTech and other areas of financial innovation from a financial stability perspective.

Financial Innovation Network Meeting


Expert Voices

Regulatory Sandboxes: Is this really their first rodeo?

By Richard Rodriguez, Consumer Protection Trial Attorney

A Few Thoughts on Regulatory Sandboxes

By Dan Quan, Adjunct Scholar, Center for Monetary and Financial Alternatives, Cato Institute 

Regulatory Sandboxes & Consumer Protection

What are regulatory sandboxes? How might they promote and stimulate innovation? What risks might they pose to consumers? Regulatory experts including DCSL’s Scott Astrada explore and debate the implications of these unique regulatory environments.


Innovation Inside and Outside of the Regulatory Sandbox

By Naeha Prakash, Senior Vice President, Associate General Counsel, Bank Policy Institute

Financial Technology and Economic Equity: The Promises and Perils of Regulatory Sandboxes

By Scott Astrada, Non-Resident Fellow, Digital Civil Society Lab