Innovative FinTech solutions are transforming the financial landscape. However, the industry’s rapid development pace has far outstripped the ability of regulatory bodies to adapt. As a result, a climate of legal uncertainty has emerged — one that hinders the rollout of new products and stalls broader market progress. Regions have introduced a new approach to address this challenge: the regulatory sandbox.
What Is a Regulatory Sandbox — and Why Does It Matter?
A regulatory sandbox is a special legal framework that allows companies and startups to launch limited-scale pilots, conduct testing, and trial innovative financial solutions with real users — all within a controlled environment and without the risk of violating local regulations.
Regulatory sandboxes are typically launched by national regulators and government agencies seeking to foster innovation and support emerging technologies. These initiatives are designed to:
- lower barriers to innovation;
- boost the competitiveness of the financial sector;
- protect consumers through controlled testing;
- gather data to improve the regulatory framework.
In many cases, regulators also establish innovation hubs and advisory services, creating an ecosystem around the sandbox that supports the development of financial technologies.
The concept of a financial regulatory sandbox was first implemented in the United Kingdom in 2016. The initiative proved so successful that, by November 2020, more than 73 regulatory sandboxes had been established across 57 jurisdictions, according to the World Bank. Kearney reported that by February 2023, the number of FinTech sandboxes had grown to 93.
Participants in regulatory sandboxes typically include FinTech startups, technology firms, and innovation arms of traditional financial institutions — particularly those offering solutions that fall outside existing legal frameworks. The participation process involves submitting an application, undergoing risk assessment, receiving regulatory approval, agreeing to specific limitations and reporting requirements, and operating under heightened supervision. Restrictions may include caps on the number of users, transaction volumes, or the project’s overall duration.
At the end of the trial, there are two possible outcomes:
- If the pilot is successful, the project may be granted a full license or inspire regulatory changes that enable similar solutions to enter the market.
- If issues arise, the project can be revised or shut down — without threatening the broader financial system.
By bridging the gap between fast-moving innovation and outdated regulatory norms, sandboxes enable the FinTech industry to evolve without compromising financial stability.
The Most Prominent Regulatory FinTech Sandboxes
Authorities in the United Kingdom, Singapore, Hong Kong, and the UAE have launched some of the most successful regulatory FinTech sandboxes.
The UK’s Financial Conduct Authority (FCA) launched the world’s first regulatory sandbox in June 2016. In its first seven years, the program received over 630 applications, selecting around 160 participants. Approximately 60% of the projects went on to obtain full licenses — the most well-known being the neobank Revolut.
The Hong Kong Monetary Authority (HKMA) launched its sandbox in September 2016. Participation is limited to banking institutions and their FinTech partners, but no separate accreditation is required. As of early 2024, more than 280 pilot projects had been conducted, resulting in around 90 products successfully reaching the market.
The Monetary Authority of Singapore (MAS) introduced its sandbox in November 2016. In addition to regulatory flexibility, MAS provides financial support to participating companies — including a grant scheme that covers up to 50% of FinTech testing costs. Over time, the sandbox has evolved into a broader infrastructure supporting the acceleration and deployment of innovative projects.
The UAE is home to three major FinTech sandboxes:
- The Abu Dhabi Global Market (ADGM), a special economic zone, launched one of the Middle East’s earliest sandboxes in late 2016. During its initial cycles, the program accepted 26 participants out of 69 applications and later evolved into a permanent digital platform. A notable success story is NOW Money — a FinTech service for migrant workers.
- The Dubai International Financial Centre (DIFC), another special economic zone, introduced its sandbox in 2017. In its early phases, the program received over 130 applications, selecting 67 companies for testing. Since 2022, applications have been accepted on a rolling basis, and a dedicated sandbox for tokenization projects is set to launch in 2025.
- The Central Bank of the UAE (CBUAE) launched its sandbox in 2024. The program is open to both domestic and international FinTech companies. Thanks to agreements with ADGM and DIFC, cross-jurisdictional integration is possible.
Other widely recognized sandboxes include those in Bahrain, India, Saudi Arabia, Australia, Canada, and the European Union. All of these countries use sandbox models as a strategic tool to balance rapid financial innovation with effective regulatory oversight.
Cross-border regulatory collaboration is also gaining traction. In 2019, the Global Financial Innovation Network (GFIN) was established to enable cross-jurisdictional testing of financial innovations. GFIN includes over 90 member organizations as of 2025, according to its official website.
It’s clear that regulatory sandboxes have become a vital part of the global financial ecosystem. They drive innovation while helping modernize legal frameworks to meet the demands of a rapidly evolving technological landscape.
