Bahamas Explores Regulatory Sandbox for Fintech Innovation

The Central Bank of the Bahamas (CBB) is considering the introduction of a regulatory sandbox to foster fintech innovation and adapt to digital finance advancements. The proposal is detailed in a 20-page consultation paper inviting feedback until August 31.

The sandbox aims to create a controlled environment where firms can test new financial technologies and services. This initiative follows the global trend, with 111 regulatory sandboxes operating worldwide, as noted by the Cambridge Centre for Alternative Finance.

The CBB’s sandbox framework would include a five-stage process: pre-application, application, evaluation, testing, and exit. It proposes an annual cohort system to manage participation, with a single cohort accepted each year based on the bank’s resource capacity.

Key goals of the sandbox include reducing time and cost to market for innovative ideas, increasing access to finance for startups, and improving consumer protection. The paper also addresses the potential involvement of other regulators if a sandbox applicant’s business intersects with their jurisdiction.

The CBB’s initiative comes as the Bahamas continues to develop its fintech sector, including the recent launch of the Sand Dollar, a central bank digital currency, and new legislation on digital assets.

An IMF report last year cautioned that sandboxes might not always be the most efficient method for regulatory oversight, suggesting that existing supervisory structures could be more effective for many authorities.