Following the lead of the UK Financial Conduct Authority, regulators in Asia have begun exploring the use of regulatory sandboxes as a safe and conducive space for institutions to experiment with Fintech solutions, where the sandbox participants may be exempted from full compliance with legal and regulatory requirements, and where the consequences of failure can be contained. In particular, regulators in Singapore, Hong Kong and Malaysia have officially introduced sandbox frameworks, some of which are already open for application. Other Asian markets such as Japan and Korea, although yet to establish similar frameworks, have set up Fintech panels or facilitation office which may pave the way to more regulatory sandboxes.


The Monetary Authority of Singapore (MAS) was the first Asian regulator to propose a regulatory sandbox, when it published on 6 June 2016 a consultation paper on proposed sandbox guidelines. The proposed guidelines are targeted at financial institutions as well as technology firms and professional services firms that are looking to leverage on existing or new technology in an innovative way to provide financial products or services, or to improve business processes.

The MAS’s broad proposal was that a sandbox would be deployed and operated by the applicant institution, whilst the MAS provides regulatory support by relaxing specific legal and/or regulatory requirements on a case-by-case basis. Examples of legal and regulatory requirements that may be relaxed include capital and liquidity requirements, licence fees, and the management experience and financial soundness of the applicant. However, the MAS has indicated that it is not prepared to relax requirements such as customer confidentiality, fit and proper criteria, and requirements on handling customer assets and prevention of money laundering.

In the consultation paper, the MAS sought feedback on the objectives and principles of the sandbox, the evaluation criteria that the MAS would use to assess applicants’ proposals, the application and approval process, and exit strategy. The consultation has closed on 8 July 2016, with consultation conclusions pending, although interested firms are encouraged to approach the MAS to discuss their proposals in the interim.

Hong Kong

Following the initiative announced by the MAS, the Hong Kong Monetary Authority (HKMA) launched on 6 September 2016 a Fintech Supervisory Sandbox (FSS) to facilitate the trials of Fintech and other technology initiatives before their full deployment – however access to the FSS is limited to authorised institutions (AIs) only. A successful applicant to the FSS would be allowed to conduct a pilot trial of its initiatives involving actual banking services and a limited number of participating customers without the need to achieve full compliance with specific HKMA supervisory requirement(s) during the trial period. However, the AI’s management must ensure that:

  • the scope and phases of the trial, as well as the timing and termination arrangements are clearly defined;

  • adequate customer protection measures are in place during the trial;

  • reasonable compensating controls are implemented to mitigate the risks arising from the relaxation of supervisory requirements, and to address the risks (including cyberattacks and system disruptions) posed by the trial to the AI’s systems and customers who are not part of the trial; and

  • the relevant systems and processes are ready for the trial.

Similar to the MAS, the HKMA has offered a non-exhaustive list of supervisory requirements that may be relaxed within the FSS, including security-related requirements for e-banking, and the timing of independent assessment prior to launching new services. While the HKMA has not set out any detailed guidelines on the implementation of the FSS, it has indicated that it would be refining the arrangements over time.


The Bank Negara Malaysia (BNM) issued on 18 October 2016 details of its Fintech sandbox, following a July 2016 consultation. The framework came into effect on the same day and the sandbox is now open for application.

Similar to Fintech sandboxes in other jurisdictions, the BNM sandbox aims to facilitate the experimentation of Fintech solutions in a live environment, subject to safeguards and the relevant regulatory requirements. The sandbox is open for access by eligible authorised financial institutions, Fintech companies which collaborate with financial institutions, and Fintech companies intending to carry on authorised business as defined under certain legislation.

Following comments received from the consultation, the BNM has expanded the eligibility criteria to clarify that innovations should have clear potential to:

  • improve the accessibility, efficiency, security and quality of financial services;

  • enhance the efficiency and effectiveness of Malaysian financial institutions’ risk management; or

  • address gaps in or open up new opportunities for financing or investments in the Malaysian economy.

Applicants to the sandbox are required to prove that their product, service or solution has been developed to a functional stage and is ready for testing. Applicants are also required to identify the potential risks to financial institutions and consumers that may arise from the testing, and to propose appropriate safeguards to address the identified risks. Unlike the MAS or the HKMA, the BNM framework does not refer to the types of regulatory requirements that may be relaxed for the testing of a Fintech solution, although an applicant may request for regulatory flexibilities from the BNM in relation to particular requirement(s).