In December 2020, the Brazilian Central Bank (BCB) approved the rules for the commencement of the first cycle of the BCB regulatory sandbox. The BCB regulatory sandbox is an initiative that allows institutions to test innovative projects, including both financial products and services, as applied to a small group of clients. The purpose is to alleviate the regulatory requirements for a limited time period in order to allow for the testing and development of innovative products and services.
In order to qualify for the regulatory sandbox, the institution must be authorized by the BCB to participate in the program and the subject project must include innovative systems regarding the delivery of services. In addition, there are a number of benefits to participating in the BCB’s program, including, among others:
- A platform for testing innovative projects with real clients, subject to specific regulatory requirements that are less stringent than those that would otherwise be applicable to financial institutions;
- Monitoring and evaluation by the BCB, thereby providing the participant with the experience of operating under a supervised environment; and
- Contact with the BCB’s regulatory area, with potential support for the eventual new financial system regulation.
The companies that are interested in participating in the regulatory sandbox must present their proposed innovative projects that qualify based on meeting the project requirements set forth by the National Monetary Council or the BCB. Given the limited resources available to the BCB, the number of participants in the program will be limited and their selection will be based on the criteria to be defined by the regulations of the program.
The BCB has approved the rules to be applied to the first cycle of the regulatory sandbox. Entrepreneurs and institutions may apply to participate during the period from February 22 to March 19, 2021. According to the BCB, ten projects will be selected and the results of the selection will be announced between March 22 and June 25, 2021. The period for announcing the results may be extended for up to 90 days, should the number of applications be in excess of twice the number of available . The first cycle will last one year and may be extended for an additional year. Activities subject to the program may begin five working days after the results have been published.
According to the BCB, the proposals for participation in the regulatory sandbox should cover at least one of the following categories of innovation:
- Solutions for the currency exchange market, open banking, PIX (a digital transfer and payment platform), and/or credit market;
- methods to increase competition in the National Financial System (SFN) and the Brazilian Payment System (SPB);
- financial and payment solutions that seek to promote financial inclusion;
- promoting the capital markets through mechanisms that include synergies with the credit markets for microenterprises and small companies; and
- promoting sustainable finance1.
The rules for first cycle of the BCB regulatory sandbox are established in Resolution BCB No. 50, available at: https://www.bcb.gov.br/estabilidadefinanceira/exibenormativo?tipo=Resolu%C3%A7%C3%A3o%20BCB&numero=50
1 The meaning of “sustainable finances” is any form of financial services integrating ESG criteria (Environmental, Social and Governance) into the business or investment decisions for the lasting benefit of both clients and society at large.
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