As the country combats a struggling economy, states are exploring ways to boost recovery. Ohio, for example, is tackling overregulation in the financial technologies — also known as fintech — industry by signing a regulatory sandbox into law.
A regulatory sandbox allows businesses to work with regulators and legislators in trialing new products, services, and business models while temporarily bypassing regulations unsuited for their idea.
This year, Ohio Senator Steve Wilson proposed a regulatory sandbox for financial products and services. The sandbox created by Senate Bill 249 will present companies with opportunities to offer their unique goods and services on the market that otherwise wouldn’t be allowed under current regulations.
The sandbox:
- Allows a company to offer its products or services in a controlled environment for up to twenty-four months with the potential for a twelve-month extension.
- Enables the superintendent of financial institutions to enter into reciprocity agreements with states running similar programs, so innovative products are trialed across several states rather than just one.
- Requires the company to remain transparent with consumers in an effort to inform them of the products they’re exploring.
- Provides controls for entry and exit from the sandbox so consumers aren’t left high and dry.
If the trial is a success, regulators and legislators offer a path forward to departing sandbox participants by using the findings of their trials to reform or even repeal troublesome rules and regulations that prevented the product from getting onto the market in the first place.
This sandbox benefits not only new companies but also existing ones. By providing businesses — both big and small, old and new — the opportunity to innovate in the fintech space, it’s hard to predict what the “next big thing” will be that comes as a result of Ohio’s fintech sandbox.
Buckeye Institute proved instrumental in acquiring unanimous support from the General Assembly for Senate Bill 249. Ohio joins a dozen other states that have created some kind of regulatory sandbox to help innovative businesses avoid problematic and outdated regulations.
Regulatory sandboxes are a solution that Libertas Institute has researched extensively, and we stand ready to help your state pursue this reform opportunity as we have with Ohio. For groups or legislators in other states looking to work on the issue, we’d love to help.
