FinTech and the City : Sandbox 2.0 Policy and Regulatory Reform Proposals

Recognizing the economic value of London hosting 17 of the world's top 50 FinTech firms, HM Treasury's strategy is determined ‘to ensure Britain remains the best place in the world to set up and grow a FinTech business.' The Financial Conduct Authority's ‘Sandbox' regime has attracted FinTech start-ups from around the world to test their technology and business with supervision and regulatory protections, providing an opportunity to grow into major businesses. The success of the intuitive Sandbox has however led to it being replicated in jurisdictions worldwide, eager to benefit from the growth of FinTech. Competition for high-calibre start-ups means the UK's post-Brexit Sandbox may need to go further than its existing FinTech Sector Strategy to continuing attracting and developing firms helping the City of London to remain the global centre of finance as perceived in the UK's Industrial Strategy. The article examines existing regulations and analyses how the UK can develop an enhanced structure to both further attract and accommodate legitimate high-calibre FinTech entrepreneurs, whilst offering strong client and investor protections to ensure financial stability. It proposes unprecedented legal and policy reforms for the Sandbox structure, including a permissible model to capitalise on funding from amateur private investors worldwide. Recommendations cover: • pre-approved ‘off the shelf' methods of innovative funding including ICOs;• one-stop shop for all investors to avoid the need for repeat registrations and AML/CFT and KYC documentations with every ICO or investment in Sandbox firms;• introduction of a SandCoin (Sandbox digital currency) that must be purchased and utilized to invest and trade with Sandbox firms;• introduction of an ICO platform and digital currency exchange (the Sandbox 100) providing further business opportunities;• real-time ‘view only' access to the firm's banking transactions and instant records of all contracts entered into (with provisions for client confidentiality and data protection obligations); • e-registration and re-examination of the barriers to entry;• compliance and intellectual property support; • re-examination of tax incentives; • support for commercialization of the technology; and• further possibilities of a Bank of England digital coin