Last month Malta's all-in-one financial regulator published Consultation Document on Pillar 1 – Regulations, which contains a proposal for a regulatory sandbox, discusses the principle of proportionality, and calls for the adoption of RegTech, SupTech and smart regulation. It is now holding workshops to discuss the design of the sandbox.

With the encouragement of FinTech innovation in mind, the regulator has held its first "consultation workshop" using FinanceMalta, the island's promotional agency. More than 120 people attended and talked to the MFSA about its proposals for a regulatory sandbox and for "regulatory and supervisory technology solutions being developed by interested parties." Most discussion centred around the way the regulatory sandbox should operate, criteria for eligibility and rules for participation. The regulators trotted out the usual platitudes about turning their jurisdiction into a global FinTech hub. One added: "Through the proposed regulatory framework, our aim is to encourage businesses to apply new and innovative business models and give them the opportunity to test the commercial and regulatory viability of their innovations, whilst containing risks to consumers and the financial system.”

Malta passed the Virtual Financial Assets Act 2018 last year with the aim of attracting firms that purvey distributed ledger technology (DLT). The sandbox (which the regulator describes as an environment which supports and facilitates innovation while "safeguarding consumer protection") is the next step.

The so-called sandbox will allow its participants to test the commercial and regulatory viability of their innovations for a specified period of time in a fully functional financial environment, under a set of conditions and limitations.

This environment will not only cater for financial services that the MFSA regulates and supervises, but also for those services that are not clearly subject to the law of financial services. It will also cater for other  products and services that enable or facilitate the provision of such financial services, such as know-your-customer (KYC) IT, anti-money-laundering (AML) IT, RegTech (regulatory technology) and SupTech (supervisory technology). It might therefore be useful for both existing financial service providers and new entrants, including start-ups, scale-ups and technology firms that use IT in an innovative way to provide or support the provision of financial services.