Canada launches fintech regulatory sandbox initiative

Canada launches fintech regulatory sandbox initiative


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The Canadian Securities Administrators (CSA), an umbrella organization of Canada’s provincial and territorial securities regulators, said it has launched a regulatory sandbox initiative for financial technology companies. The initiative will support businesses seeking to offer innovative products, services and applications in the country.

The regulatory sandbox will enable businesses that register or receive relief to test their products and services throughout the Canadian market. The CSA targets businesses that have a model that is “truly innovative from a Canadian market perspective”. Each case will be assessed on a one-by-one basis.

The main business models to which the CSA regulatory sandbox is aiming include the following:

  • online platforms, including crowdfunding portals, online lenders, angel investor networks or other technological innovations for securities trading and advising
  • business models using artificial intelligence for trades or recommendations;
  • cryptocurrency or distributed ledger technology based ventures; and
  • technology service providers to the securities industry, such as non-client facing risk and compliance support services (also known as regulatory technology or regtech).

“The objective of this initiative is to facilitate the ability of those businesses to use innovative products, services and applications all across Canada, while ensuring appropriate investor protection,” said CSA chairman Louis Morisset. “We will consider applications, including for time-limited registrations, on a coordinated and flexible basis to provide a harmonized approach throughout Canada for business models, whether they are start-ups or incumbents,” he added.

Businesses that want to partake in the initiative can receive information and support, as well as early stage guidance on the application of current securities regulatory obligations from their respective provincial regulators. The CSA noted that it may request from applying fintechs live environment testing, a business plan and demonstration of potential investor benefits as part of the application process.

In Canada, financial markets fall under the regulation and supervison of provincial watchdogs and legislation rules may vary in the various provinces. The CSA is the council of the 10 provincial and three territorial securities regulators in the country. It co-ordinates and harmonizes regulation for the Canadian capital markets. The majority of enforcement activities are executed locally, but in some cases regulators of different provinces and territories work together to supervise market players and investigate possible misconduct.

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