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posted 3 years ago
On June 23, 2020 the Central Bank of Nigeria (CBN) released for review by stakeholders, a Draft Framework for Regulatory Sandbox Operations (the “Draft Framework”); aimed at establishing a controlled environment where disruptive technology in the financial services can be tested under the supervision of the CBN.
The first regulatory sandbox in the world was formally established in 2015 by the United Kingdom Financial Conduct Authority (FCA) and was reported as successful with 90% of the companies that participated in the first cohort going on to market and 40% receiving investments. Since then many countries including Estonia, Indonesia, HongKong and states in the United States have established regulatory sandboxes.
The concept of a regulatory sandbox was borne from a need by regulators to not stifle Fintech innovation with unsuitable archaic Financial Services regulations. Accordingly, the regulatory sandboxes were geared towards enabling selected Fintechs test their products without formal licences; whilst the regulators are able to better understand the product and develop suitable regulations.
The Draft Framework is Nigerian government’s effort to encourage Fintech innovation whilst protecting consumer interests and is a welcome development. Below are highlights.
Conclusion
The sandbox is a step in the right direction by the CBN. The following points should however be considered in finalising the ‘Draft Framework.
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