The Promotion of FinTech and the Regulatory Sandboxes in Italy.

The Ministry of Economy and Finance, on April 30, 2021, set out a regulation establishing the FinTech Committee and Regulatory Sandboxes (hereinafter, Regulation)¹.

The purpose of the Regulation is to promote activities, named FinTech, that through the use of new technologies are able to innovate in the banking, financial and insurance markets².

However, since these markets are regulated and supervised by independent authorities in Europe ³, this promotion must ensure that consumers, investors and capital markets are adequately protected⁴ and that legislation and regulation evolve accordingly⁵.

The Regulation is fully in line with the European Commission's policy on financial technologies as expressed in its 2018 Communication "Financial Technologies Action Plan: for a more competitive and innovative European financial sector"⁶. This Communication led, among other things, to the creation of the European Forum for Innovation Facilitators (EFIF) in 2019.

The EFIF is the platform for the European Financial Market Supervisory Authorities (ESA)⁷ whose main purpose is “to promote coordination and cooperation among national innovation facilitators to foster the scaling up of innovation in the financial sector”⁸.

In other words, this is a tool to standardize the regulatory interventions of European authorities on FinTech.

In general, facilitators in this sphere take two distinct forms: innovation hubs and regulatory sandboxes.

Innovation Hubs act as a contact point between relevant authorities and innovative companies. The Hubs guide the companies , in a non-binding manner, on regulatory and supervisory expectations, including licensing requirements. In Italy they are the Bank of Italy and ISVASS⁹.

The regulatory sandboxes allow supervised intermediaries and FinTech players to test innovative financial products or new business models for a limited period of time (18 months + an extension) based on a specific testing plan agreed with and monitored by the relevant authority.

Regulatory sandboxes are now governed by the Regulation.

In accordance with the policy goals of the EU and the Regulation, only those activities that are likely to affect supervised markets and whose innovations may be beneficial to the market, consumers, and the Regulation itself, are considered eligible for testing under the Regulations¹⁰.

FinTech operators headquartered in non-EU states can also apply for testing under the Regulation.

If the testing is successful, the company must comply with any necessary subscriptions and registrations, while the authorities must endeavor to make changes to the regulations necessary to allow the activities to be carried out outside of the testing itself.

Supervisors may establish two-month time windows within which applications may be submitted. They may also determine the maximum number of eligible applications.

The Bank of Italy availed itself of this opportunity by opening the first time window on November 15, 2021. Applications can be submitted until 15 January 2022.

The Bank of Italy's dedicated internet page https://www.bancaditalia.it/focus/sandbox/ provides all useful information, including that relating to the application procedure.