The Japanese government is reportedly plotting a pro-innovation sandbox that will encourage FinTech startups to enter the banking industry through regulator-free trials.
According to a report by prominent Japanese publication Nikkei , the government looking to update its often-criticized FinTech regulations to make it easier for new innovative services to take shape in the country. According to the report, a pro-innovation government panel discussed a suggested proposal for a regulatory sandbox on Friday.
The new framework will encourage corporations and startups alike to trial new services without having to worry about any crippling government regulations. Government agencies would see proposals from developers before granting them approval to run experiments for a limited time within the sandbox. During this period, developers will be exempt from having to adhere to existing requirements and standards.
Notably, the sandbox will allow trials to be conducted nationwide.
An excerpt from the report reads:
In the FinTech sector, for instance, startups could find it easier to enter the banking industry. That could promote the spread of financial services utilizing smartphones or artificial intelligence.
The Japanese banking industry is notable for its endeavor in developing Fintech solutions. Unlike a significant majority of any of its counterparts around the world, Japanese banks are already experimenting with digital currency payment trials and domestic money transfers over a blockchain.
As an example of plugging into financial innovation, Japan’s three ‘megabanks’ are all investors in Tokyo-based bitFlyer, Japan’s largest bitcoin exchange. In most other countries around the world, the banking industry actively avoids any association with bitcoin, going so far as to deny banking services for bitcoin companies in countries like Australia.
This month, Japan’s largest bank issued its digital currency to employees ahead of a wider planned commercial rollout this year. Separately, all of Japan’s banks could soon be linked on a common blockchain for a number of core banking processes including money transfers. Suffice to say, the banking industry is onboard.
Their significant resources, however, could dissuade new FinTech startups from entering the banking sector –underlining the need for a friendly deregulatory sandbox.
‘Waiting for full-fledged deregulation to catch up with the rapid advances in fintech and other areas could leave Japanese companies behind the rest of the world in the race for market share,” the report added.
The sandbox, which could be established in the fiscal year of 2018, will also prove a significant pillar of a new economic growth strategy, reportedly set to compiled in June 2017.
The results of these sandbox-trials will also shape future policies, ultimately leading to some regulations ‘being eliminated entirely’ to keep up with the changing commercial technological landscape.
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