Regulatory Sandbox: A Prospective View for Brazil's Regulation Model

Ms. Luiza Leite

FinTech platforms have been changing the financial industry's way of offering products and services. These services are provided through mechanisms that did not exist before, which creates a question as how regulators understand the business model of these platforms and what regulatory treatment is necessary for it. These questions are due to the need to know how to regulate the business of FinTech platforms, maintaining in a balanced and proportional matter, without impeding the advance of innovations. In light of this discussion, the main problem in Brazil is the lack of a regulatory framework for these platforms. The uncertainty about the legal framework and the requirements for this sector, such activities becomes a barrier for the business. This fact contributes to information asymmetry and demonstrates the need for specific policies for this business activity. This paper’s hypothesis is the creation of regulatory sandboxes would be an efficient alternative for Brazilian regulators to act on FinTech platforms. The arguement that holds the hypothesis are: (i) Sandbox will establish a more effective dialogue between the sector and regulators, to understand the nature of the operation; and (ii) Sandbox allows a smoother transition by FinTech platforms to their governing rules, aiming for supervision based on the real activities of the segment. The present work aims to investigate in what extent it would be possible to implement the sandbox regulatory model in Brazil. For that, it will be used previous successful experiences from other countries to trace the characteristics and parameters that best fit the Brazilian institutional-administrative model. This paper aligns with the Administrative State theory. Additionally, the institutional’s insight of the dialogues between government and private players is the theoretical framework of this paper. Besides, the hypothetical-deductive criterion it will be used as a methodology, including the analytical research model. The work timeframe focuses on the regulatory sandbox creation period, this being the year 2015 to this day, and the space frame focuses on Brazil’s economic-institutional reality, as well as in countries that already have adopted such regulatory models, such as the United Kingdom, Singapore and Hong Kong.