DC Mayor Establishes Regulatory Sandbox and Innovation Council

Washington, DC, Mayor Muriel Bowser recently established the District of Columbia Financial Services Regulatory Sandbox and Innovation Council ("the Council").

The Council is charged with studying and reporting on the feasibility of implementing a financial services regulatory sandbox in the District of Columbia and has also been tasked with developing a blockchain and innovation regulatory framework to facilitate financial services innovation in the District.

Ultimately, if the sandbox is deemed a viable opportunity, the Council will provide legislative, programmatic, and policy recommendations to the mayor.

The Council will consist of professionals from the insurance, securities, captive insurance, and banking industries; consumer representatives; technology industry members; and financial services regulatory professionals.

According to the District, in 2015, the UK's Financial Conduct Authority pioneered the regulatory sandbox as a space for businesses to test innovative products, services, business models, and delivery mechanisms without immediately incurring all the traditional regulatory consequences of engaging in the activity.

The District said its sandbox serves a variety of purposes in addition to fostering innovation and competition including the following.

• Helping regulators understand how innovative firms are evolving and can adapt regulatory rules, if necessary and appropriate, to better suit the evolving landscape while protecting consumers
• Allowing technology to be used to streamline and innovate the District's regulatory operations, which could further benefit financial services providers and consumers

Furthermore, the District said technology innovations can lead to more affordable products and services, new distribution channels that reach excluded groups, operational efficiencies that make it possible to serve low-margin customers profitably, and better compliance and risk-management approaches.

"This initiative has the potential to provide new opportunities for consumers to create, build and protect wealth," said Commissioner Stephen Taylor of the District Department of Insurance, Securities and Banking. "With the Department's regulatory authority of all three major financial industries, we are well positioned to provide a full-service and integrated regulatory sandbox."