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How to Build a Regulatory Sandbox: A Practical Guide for Policy Makers

Regulatory sandboxes have attracted significant attention for their potential to empower financial regulators struggling with fast-paced innovation. Through a sandbox, regulators can carefully monitor digital products, services and business models in a live testing environment, enabling firms to bring innovations to market more quickly and readily. But when and under what circumstance sandboxes are the most appropriate tool for emerging market regulators to respond to the wave of digital technologies that are disrupting the financial sector?

This guide leads regulators step by step through the decision-making process, including the alternatives to first consider. It then examines the design and implementation factors for creating a successful sandbox environment.

CGAP is a global partnership of more than 30 leading development organizations that works to advance the lives of poor people through financial inclusion. Using action-oriented research, we test, learn and share knowledge intended to help build inclusive and responsible financial systems that move people out of poverty, protect their economic gains and advance broader development goals. We research and experiment to achieve proof of concept and extract lessons that can be built to scale by our partners, who apply our insights in the marketplace.