Although Israel is a world leader in the fintech field, companies operating in this area face many regulatory challenges.
A newly published legal memorandum aims to enable the creation of a “sandbox”, with inspiration from various programs already implemented in Japan, Australia, and Singapore. The goal is to establish a unique experimental environment, a “regulatory sandbox,” where regulatory relief is granted to companies who choose to participate in the program.
The “sandbox” will be operated by various regulators and will help to adjust regulation to fintech companies, while limiting the risks involved. This learning method of trial and error will help both fintech companies and regulators to deal with the regulatory challenges that characterize the fintech field in Israel. The ultimate goal is to promote this industry in Israel, improve diversity and competition in the field, and protect the public.
A committee comprised of representatives from Israel’s major financial authorities, including the Supervisor of Banks, the Capital Market, Insurance and Savings Authority Commissioner, and the Israel Securities Authority, will operate the program. The committee will independently select companies operating in the fintech field and the duration of the program will be two years.
The program will offer two alternative tracks:
- Licensing track – This track is for companies whose operations require a license from a financing authority. Such authority may make regulatory adjustments to the requirements to obtain a license for the company participating in the program.
- Accompaniment track – The purpose of this track is to address the difficulties encountered by fintech companies, primarily dealing with the banking system in the area of money laundering and terrorist financing.
The memorandum suggests that the financial authority to lead an individual process be determined in accordance with the specific participating company’s areas of activity.
To read the memorandum, click here.