Plans for sandbox in Ireland welcomed but startups question why it has taken so long

The Central Bank of Ireland's plans to have its sandbox up and running this year, but some have railed against the absence of testing of products in the open market.
Plans for sandbox in Ireland welcomed but startups question why it has taken so long

The Central Bank of Ireland’s plan to launch a regulatory sandbox has been largely welcomed by startups but some are questioning why it’s taken the bank so long to launch it.

In November last year, the Dublin-based bank announced plans to launch a sandbox, a mechanism (popular in other markets) allowing startups and fintechs to test new products in a safe environment before launch.

The launch is part of the bank’s wider plan to beef up its work with startups including revving up its Innovation Hub.

The bank’s Innovation Hub, launched in 2018, helps startups and existing financial players engage with regulators as they develop new tech and products.

The bank has now launched a consultation with stakeholders on the proposed sandbox and other changes, with the consultancy ending on February 8.

Gabriel Maklouf, governor, Central Bank of Ireland, said:

“The proposed innovation sandbox programme will engage innovators with relevant central bank experts.

“This will help firms to understand the potential regulatory implication of their innovations while fostering innovation to meet the needs of households and businesses into the future.”

The bank says the sandbox will be open to applications from all sectors of the financial system, have a transparent applications process, and the bank will share outcomes of all sandbox activity with stakeholders yearly.

It adds that the sandbox, which is planned to be operational this year, will take a thematic approach but will not involve any live testing of products with consumers in the open market.

It also proposes that the private sector will fund the sandbox.

Sandboxes have become prevalent around the world, with 111 now in existence, according to the Global Regulatory Innovation Dashboard.

Wait and see

Responding to the proposal, Patricia Callan, director of financial services, Ibec, the business lobby group, said Ireland's business industry has been clamouring for a sandbox for “a while now”. But she said the bank’s strategy was rather “wait and see” than to lead.

By comparison, in the UK, the FCA launched its sandbox in 2016.

Callan said:

“It’s great that they are doing it. But on the other hand, I guess it’s a lot more restrictive than what you might see in other countries. It’s a starting point, and I think we are happy with that.”

She said this restrictiveness was highlighted by the fact the sandbox will not involve any testing of products in a live environment. However, she said this could change over time.

She added:

“The idea behind the sandbox is that it helps the innovators understand the regulatory process earlier and better but equally the central bank, their level of expertise and their ability to understand that, to be able to regulate it, is also critical.”

Late coming to the table

In agreement is Rob Leslie, founder and CEO, Sedicii, the Ireland-based fraud and money laundering prevention fintech, who said the bank was “definitely late coming to the table”, saying the bank took a “very cautious approach”.

On whether a sandbox in Ireland would have helped Sedicii, he said:

“It absolutely would have helped us. The banks here , had they known our product had gone through the sandbox and had been tested using central bank data and the models stood up to scrutiny, it would just have made life so much easier.”

Lead image via X.

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