Taiwan legislates fintech sandbox, gets encouraging response

Reported by: |Updated: October 30, 2018

Taiwan has an official Fintech Office under the aegis of the country’s regulator, the Financial Supervisory Commission (FSC). Set up in the late 2015, Fintech Office functions as a platform responsible for the planning and promotion of fintech activities. It particularly focuses on undertaking studies and research in digitization of the financial services, mobile payment, third party payment, financing platforms like peer-to-peer lending, online investments and IoT.

A report in Banking Frontiers covering the fintech scenario in Taiwan says the FSC came out with a report in 2016, outlining its major objectives, which included (i) doubling the ratio of ePayment within 5 years from the present ratio of 26% via public promotion and private sector participation, (ii) promoting blockchain technology (iii) the establishment of a special task force for research on applications of the technology, (iv) supporting finance innovation efforts of startups through the Financial Technology Development Fund, (v) encouraging the use of tokenization technology for virtual and physical cards, (vi) developing physical and virtual branches of financial institutions to achieve the diversification of service providers and multiple access points of their services, and (vii) improve the existing facilities of financial institutions and creating an integrated, secure online ID verification mechanism.

The report further mentions that Taiwan’s Legislative Yuan passed the Financial Technology Development and Innovative Experimentation Act in January 2018, which is aimed to foster a positive environment for new and untested forms of financial technology. The act provides for the creation of a regulatory sandbox in Taiwan, the 10th country in the world to have one, aimed at allowing fintech startups a period of up to 3 years to develop and test their products or services, while avoiding the risks associated with such development or endangering the rights and interests of financial consumers. The legislation offers legal protection to fintech startups, a first for the world.

The response to the sandbox has been encouraging with several enterprises approaching the FSC, which is the competent authority under the act. The applicants include those working in the realm of blockchain, cross-border remittance technologies, P2P online lending platforms, investment robo-advisors, online insurance, cryptocurrency platforms etc.