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Sandbox Express as the Fast Line for FinTech Startups in Singapore

Sandbox Express as the Fast Line for FinTech Startups in Singapore 

The original text of this article was edited after receiving the respective comments from the Monetary Authority of Singapore.

Singapore, which is already known as the Asian innovation hub, is becoming even more popular now. In the middle of August, the Monetary Authority of Singapore (“MAS”) has adopted new Sandbox Express rules for innovative businesses. As the name implies, the rules provide a fast and easy entry into the sandbox compared to existing sandboxes or licensing procedures in the country. Taking into consideration the current unstable positions of Hong Kong, such an initiative makes Singapore much attractive for FinTech companies.

Who can apply?

For now, only a few regulated activities are allowed to operate in the sandbox, in particular, insurance brokerage, recognized market operator activity, and money remittance businesses. These types were determined to facilitate the growth of innovative technologies and their greater adoption in the financial sector. However, the regulator emphasized the intention to review the scope and extend the range of financial products and services that can be offered through Sandbox Express.

While conducting the above-mentioned activities in the sandbox, a business can safely and quickly test its experimental ideas and technologies in a real market environment.

Regulations are here to stay 

It should be noted that the sandbox status does not mean the avoidance of the respective regulations. All applicants must be compliant with relevant requirements, except the granted exemptions. For example, money remittance businesses in the sandbox must comply with the Money-Changing and Remittance Businesses Act. Nonetheless, they are exempted from placing a security deposit (approx. 72,000 USD) during the sandbox period, and from some fees as well.

If you are not ready to fully comply with respective regulations at the point of application, the MAS is quite flexible in this regard — some requirements might be postponed by the regulator till the start of the experiment on a case-by-case basis. Means, in any way, an applicant must be fully compliant with relevant regulations at the moment of starting its innovative activity in the sandbox. 

Notably, the regulator has clearly stated that issuers of stablecoins do not, in and of themselves, constitute as remittance businesses within Sandbox Express. So, while dealing with stablecoins within Sandbox Express, you must meet the definition of remittance. Alternatively, you may consider the general Sandbox approach in Singapore or take a closer look at other jurisdictions like the United Kingdom where, in the meanwhile, its new guidance for crypto assets was adopted.

How long does it take?

Generally, a decision upon your application will be taken within 21 days. Of course, the regulator might take its time if additional efforts are required to understand your business model better. 

After approval, you will be able to test your technology for up to 9 months. When the time-limit expires, you should decide whether you wish to continue your activity and proceed with full licensing, or stop it. Both options are possible. By the way, you cannot apply for another sandbox in Singapore after Sandbox Express (or vice versa), unless the proposed business model or technology materially differs from the one that has been already tested.

What is required? 

The Singapore regulator prefers a principle-based approach, rather than strictly written requirements. So, when applying for the sandbox you should refer to the evaluation criteria described in Sandbox Express Guidelines. First and foremost, the guidelines clearly state that the risks of each experiment with your business must be accurately calculated and risk level must be low. 

Further, the regulator will assess your business by two main criteria. First, whether your proposed service or product is innovative and evidently differs from similar products already presented on the market. Second, whether your company’s all main stakeholders, including chief executive officers and directors, are fit and proper (in other words, they are sufficiently competent and have no unspent convictions; were not involved in business licensing breaches, etc.). 

In the meanwhile, some requirements that are expected from you by the regulator are quite broad, such as the ability to meet certain expectations in relation to business operations that the MAS will deem necessary for the implementation of Sandbox Express. However, we believe these uncertainties would not make many problems for entry into the sandbox and any other specifics that the MAS may deem necessary will be indicated on a case-by-case basis, as it is commonly done among the regulators worldwide. 

 

Disclaimer: the information in this article is provided for informational purposes only. You should not construe any such information as legal, tax, investment, trading, financial, or other advice. This article outlines the personal thoughts of the authors and may not conform to the position of their companies.

Sergio Mokhniev & Kristina Nikipolska

Compliance Experts at Legal Nodes

 

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