Based on a proposal from the Ministry of Industry and Trade (MIT), the government has approved the development of a Digital Regulatory Sandbox to support rapidly growing companies such as startups and spin-offs in the area of financial innovations and decentralised technologies. The sandbox will provide selected participants with various forms of support including comprehensive and independent consulting, legal consultations pertaining to newly regulated areas within and beyond the financial market, and technical testing of innovative products. CzechInvest will launch the sandbox in cooperation with universities and fintech associations by the middle of this year.
“In order for small and medium-sized enterprises to successfully introduce new financial technologies in accordance with Czech and European regulatory requirements, they need to thoroughly test their products and services. Our aim is to support their innovations to the greatest extent possible, and we will therefore launch a special platform called a sandbox, which will enable startups and spin-offs to develop new, innovative products and experiment with them, and thus verify whether their solutions fulfil the relevant legislative conditions. Thanks to this, we will not only help those businesses to lower their initial costs, but also enhance their competitiveness and thus support the Czech fintech community in the face of international competition,” said Minister of Industry and Trade Jozef Síkela, who further stated that the sandbox follows on from the Technology Incubation project, by means of which CzechInvest supports a number of innovative fields, such as space technology and artificial intelligence.
In general, a regulatory sandbox is a tool that enables companies to verify whether new technologies and products fulfil all regulatory requirements. Financial and decentralised technologies are one of the first areas in which this tool has been successfully implemented both in the European Union (EU) and globally. One example is the EU Blockchain Regulatory Sandbox established by the European Commission. In the initial phase, the Czech sandbox will be thematically focused on fintech and will help companies to verify which regulatory requirements will be imposed on them and to prepare for the relevant approval process, if such is required. The experience thus gained can subsequently be used in other areas that progressively become subject to regulation. Consultations and expert assistance with regulation and business models will gradually be supplemented with a technological part for testing products in a controlled environment prior to their introduction to the market.
Besides the MIT, the Ministry of Finance is also involved in the development of the sandbox. “We see the regulatory sandbox as an appropriate tool that will encourage the establishment of new companies in the area of fintech and DLT, and thus the faster development of innovations in the area of financial services in the Czech Republic,” says Minister of Finance Zbyněk Stanjura.
With respect to the effective use of public funding, it is important for the MIT to achieve synergies with other business-support programmes that have already been implemented within CzechInvest. The digital regulatory sandbox project has potential for further use in supporting businesses in various fields that are subject to new rules and regulations and in which innovative technologies and services for customers are being rapidly developed.
The project is part of the National Recovery Plan (NRP) under the name “Digital Regulatory Sandbox in Accordance with EU Priorities”. The budgeting of the investment is based on principles similar to those that are common in other EU countries (e.g. Austria), where the expended costs are calculated in relation to the individual supported companies, i.e. the sandbox participants.
Most of the funding will thus be used to cover the costs of services provided to the companies and the establishment of a technical testing environment. The specific amount will be based on the project that CzechInvest and its partners submit within the call issued by the MIT. The investment will be fully covered using funding from the NRP and thus will not place a burden on the state budget. Its maximum allocation is CZK 150 million. However, this amount will not necessarily be fully expended and will depend also on the further usability of the built-up infrastructure, e.g. to support other innovative fields.
“The first phase of project implementation consists in the specific setup and launch of the sandbox. That will therefore be the content of the application to be submitted by CzechInvest together with its partners. We anticipate that the operation of the project will be similar to that of other, successful sandboxes abroad, from which we are taking inspiration. We are striving to set up the project so that it will help businesses to the greatest possible extent, of course within the framework of what the European legislation in particular allows us to do,” says Petr Očko, deputy minister for digitalisation and innovation at the MIT and acting CEO of CzechInvest. Preparations have been ongoing for an extended period. However, approval by the government is an important milestone, after which it will be possible to begin implementing the project in connection with fulfilment of the NRP. “The second phase of implementation will involve a programme for which highly innovative companies will be selected and provided with, among other things, professional consulting by independent experts. Presentations of the participants will be given within the programme and representatives of regulatory and supervisory bodies will also take part in discussions with them. Conversely, an essential benefit for public institutions will consist in gaining insight into the functioning of the highly innovative services that will enter the market, thus enriching their own know-how. In this way, regulatory sandboxes contribute to the development of not only the financial ecosystem, but also of similar institutions abroad,” Očko adds.
Contact fot the media:
David Hořínek
PR Manager and Spokesman
+420 724 591 667
david.horinek@czechinvest.org
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