Regulatory "sandbox" of the Bank of Russia

What is regulatory "sandbox"

In a common understanding regulatory "sandbox" is a particular treatment which allows the companies to test the innovation financial services and products without risk to violate the existing legislation. New technologies and projects very often have legal limits. They can not correspond in whole or in part to laws, or there can be no regulation in this sphere because of what potentially successful business will become impossible. Problems of "sandbox" of the Bank of Russia to contribute to the development of innovations, competition development, increase in security, availability of financial services, reduction of time and costs for implementation of new services.

Regulatory "sandbox" of the Bank of Russia is intended for piloting and rapid implementation of new financial services and technologies

According to an analytical note of the Central Bank, the regulatory platform will provide fast check of hypotheses of positive effects from implementation of the innovative financial technologies and services for financial market and consumers, will allow to reveal and analyze possible risks and to propose measures for their elimination. Including in "a regulatory sandbox" it is going to carry out pilot projects in such directions as use of biometric technologies, technologies of the distributed registers, cryptotechnologies, artificial intelligence, open interfaces, crowd funding and other.

Services, services or technologies which underwent piloting in "a regulatory sandbox" can be or are approved to implementation with the subsequent formation of the plan for development of a necessary regulatory framework, or recognized inexpedient for application.

In the world regulatory "sandboxes" began to appear in 2015. Great Britain was a pioneer. The similar modes exist in Canada, Australia, the UAE, Singapore. In the USA first "sandbox" appeared in August, 2018^[1]. Then 12 regulating authorities from the different countries, including listed, announced creation of a global network of financial innovations^[2] based on which they create international "financial technical-sandbox".

In some countries testing of new products is held in the closed environment, on a limited number of clients, with restriction on the volume of transaction and total volume of responsibility to clients. In other "sandboxes" participants are partially exempted from observance of obligatory standards. The Bank of Russia studied the international experience and decided to go some other way.

As "financial technical-sandbox" is arranged

According to Ivan Zimin, the acting as the director of the department of financial technologies of the Bank of Russia, "sandbox" is decided to be divided into two stages. At once considered to bring new technologies to the general perimeter of federal regulation risky and premature. Therefore now only the first part is implemented: testing of new technologies without risks for the consumer.

In fact this modeling of new processes on paper. The Bank of Russia and profile departments study the request and estimate potential risks, ask questions and make the decision on expediency of implementation of services. Also perhaps technology testing on infrastructure of the organization which submitted the application or on infrastructure of the Bank of Russia. The decision is made that duration of such testing should not exceed 1.5 months unlike half a year up to two years in other countries.

The second stage of regulatory "sandbox" assumes testing in actual practice, with restrictions on the number of clients and volumes of transactions. But, according to Zimin, there is no need for it now. This stage is required, only if testing at the first stage reveals shortcomings of process or will demand more detailed study.

Necessary change in the legislation which will allow the project to work in actual practice should become a result of successful piloting. At the same time in the Bank of Russia understand that it is impossible to delay with rule-making in this case and hope for adoption of the corresponding regulatory legal acts within a year.

Who is taken in "sandbox"

The Central Bank calls seven technology directions of projects for piloting, as priority:

• the distributed registers,
• Big Data and machine learning,
• biometrics,
• mobile technologies,
• digital profile,
• artificial intelligence and robotization,
• open interfaces.

For the first four months of work of "sandbox" 23 applications for piloting were submitted. From them 7 requests from credit institutions, 7 from the companies of a technology profile and 6 requests from other companies including working in the field of communication.

Any of these projects did not go beyond certain directions. At the same time the bigger emphasis in requests is placed on technology of the distributed registers, Big Data and machine learning and also on a digital profile (everything, as for identification of users and a possibility of data acquisition about citizens and the commercial organizations from bases of the state departments).

At the same time does not support the projects connected with implementation, development and use of cryptocurrencies which now are not regulated in any way the regulator in spite of the fact that formally there are no restrictions on subject for submission of requests.

This position does not extend to digital financial assets, tokens and ICO to which the first ended pilot was devoted. Sberbank CIB and National settlement depositary tested technology of carrying out transactions on attraction of financing by release of tokens for a blockchain (ICO). Results of the pilot do not reveal, but is going to use results at completion of the relevant bills to the second reading in the State Duma.

2 more projects, as of September, 2018, are in process of piloting, 4 prepare for consideration, 15 on completion and 1 project is not approved in "sandbox" as experts did not see in it "semantic filling".

The application for participation in piloting is required to be filled out as much as possible in detail, doing not pass any point, to make the scan copy and to put in order to the address: fintech@cbr.ru Is warned that he can the impressive Talmud will turn out. The form can be downloaded here.

History

2018

The NSD and Sberbank summed up the results of testing of ICO in "sandbox" of the Bank of Russia

Sberbank and the National Settlement Depositary (NSD) summed up on October 19, 2018 the results of the test transaction on attraction of financing by release of tokens on a blockchain (Initial coin offering, ICO) in "sandbox" of the Bank of Russia. The Level One company providing service of commercial lecture halls in Moscow acted as the issuer of the transaction. The project was developed on the MasterChain platform.

As stated in the message of Sberbank, during the transaction on a test environment 285.800 tokens which were transferred from the account of the digital assets (DA) of the issuer into the account of Sberbank were placed. Further several tokens were used for payment of the block of the online tasks offered by the issuer that was technically implemented by transfer of tokens from the account of Sberbank into the account of TsA of the issuer. The last stage of piloting the issuer utilized the tokens received from Sberbank, having directed them to the irrevocable address in a blockchain as under the terms of the offer tokens are not subject to reuse.

All actions within the transaction were made using the MasterChain platform and the set note in NSD.

As a result of testing advantages of ICO to its participants were also confirmed:

• broad access of investment projects to audience of institutional investors and their clients;
• institutional investors get access to investments into tokens with the minimum costs of means and resources;
• individuals get access to investments into tokens through financial institutions which clients they already are.

Start of work on the test transaction on ICO in "sandbox" of the Bank of Russia took place in May, 2018. Sberbank acted as the coordinator and the underwriter of placement, became NSD custodian of the transaction, providing accounting of digital assets and calculations at their release and the address.

Participation in "sandbox" of the Bank of Russia gave the chance to receive assessment of experts of bank and departments and also to create the working road map on creation of legal conditions for rendering service, to estimate features of work with similar transactions and to minimize the related risks, noted in Sberbank.

The planned adoption of the bills "About Digital Financial Assets" and "About the Investment Attraction using Investment Platforms" will allow Sberbank and NSD to scale experience and to attract financing by release of tokens for a wide range of the clients.

The NSD and Sberbank test ICO technology on the regulatory platform of the Bank of Russia

In May, 2018 Sberbank CIB, korporativno investment business of Sberbank, and the National Settlement Depositary (NSD) announced intention to jointly test on the regulatory platform of the Bank of Russia technology of carrying out transactions on attraction of financing by release of tokens on a blockchain (Initial coin offering, ICO). The Level One company managing the largest commercial lecture hall in Moscow will act as the issuer.

The first transaction with use of the tokenized assets is going to be performed by the end of summer of 2018. Accounting of tokens and calculations at their release and the address are going to be performed for the first time using infrastructure of financial market – National settlement depositary. Sberbank CIB will act as the coordinator of placement and the anchor investor of the released tokens of Level One, the NSD will act as custodian of the transaction, will perform storage of digital assets, their registration and accounting.

Work on a pilot project on the regulatory platform will allow Sberbank CIB and NSD to estimate features of work with similar transactions, to minimize the related risks and also to receive a feedback from the Bank of Russia concerning improvement of mechanisms of their carrying out. Further experience and examination of Sberbank CIB as leader of investment business in Russia will allow to give to the Russian ICO additional transparency for traditional investors and to provide high quality of the organization and carrying out such transactions.

The planned adoption of the Bills "About Digital Financial Assets" and "About the Investment Attraction using Investment Platforms" will allow Sberbank CIB and NSD to scale the got experience on attraction of financing by release of tokens for a wide range of the clients.

Bulantsev Igor, the Senior vice president of Sberbank, the head of Sberbank CIB, noted: "Sberbank CIB considers high-perspective the Russian market of ICO. Many clients of Sberbank show interest in this method of attraction of financing, and we intend to promote actively this service after entry into force of the relevant legislation, acting as one of drivers of an institutionalization and promoting of this transaction type".

Start of "a regulatory sandbox" for testing of financial detailed projects

The Bank of Russia announced on April 19, 2018 start of the "regulatory sandbox" created for testing of the innovative financial technologies, products and services. As noted in an analytical note of the Central Bank about world experience of use of the regulatory platform, start of the similar mechanism of piloting of financial detailed projects in Russia is intended to provide conditions for development of innovations in financial market and transition to digital economy.

In the Bank of Russia "the regulatory sandbox" for testing of the innovation services and services earned

Joint work of the regulator and market participants on piloting of new services and technologies will promote expansion of a range of financial services and improving competitiveness of the Russian financial market — Olga Skorobogatova, the First Deputy Chairman of the Bank of Russia is convinced.

Notes