H.E. Sultan bin Saeed Al Mansoori, Minister of Economy and Chairman of the Board of the Securities and Commodities Authority (SCA), issued a decision approving the fintech regulatory framework/regulations governing the testing environment, which will come into effect on the day following the date of publication in the Official Gazette.
The decision came in response to the rapid advances in the fintech sector and the constant emergence of new innovative financial services and products. It is also in line with SCA’s vision to maintain the rights of investors and promote sound financial practices.
By issuing this decision, SCA aims at defining a framework for operating and managing the testing environment, thus creating an environment attractive to capital (which also serves as an interactive platform that brings together fintech companies), improving the regulatory framework, greasing the wheels of economic growth, and regulating risk.
The testing environment is defined as “an experimental fintech laboratory organized into a regulatory framework that is meant to allow entities to test innovative products, services, programs, and business models in a simplified and controlled environment, within a limited and restricted scope and timeframe”.
The fintech lab concept is not new; it has been already implemented in non-financial sectors. However, it has recently been spreading more widely in financial sectors across many countries of the world.
As part of the National Strategy for Innovation adopted by the UAE government, which aims to create an environment that stimulates innovation, SCA said that it is keen to promote innovation through the development of a regulatory framework.
The testing environment will become a major draw for innovators to test innovative products, services, programs, and business models in a limited regulatory space. This can be achieved by pursuing an approach to relax the regulatory requirements or exempt testers from some of these requirements under a controlled testing environment, with appropriate assurances to protect consumers. The testing environment is designed for developers of fintech projects, whether emergent or existing companies or individual projects by entrepreneurs.
SCA will work with applicants to evaluate products, services, programs, or business models and identify which legal and regulatory requirements can be softened and which ones applicants can be exempted from. Cases will be evaluated separately.
The testing period will last six to twelve months during which SCA will have a better idea of the innovation’s impact on consumers and the financial sector.
SCA made it mandatory for applicants to submit a report of the information collected from the testing process and to document and maintain such information during the testing period for SCA’s review later.
