The Center for Law and Development (CLD) at Qatar University (QU) publishes innovative new research in which it proposes unprecedented reforms that encourage high-calibre financial technology (fintech) start-ups to develop in Qatar. Other countries have capitalized on financial technology firms, transforming them into billion dollar companies. The CLD research illustrates how countries including Qatar and the United Kingdom (UK) can do the same, by making reforms to the current “sandbox,” which is an incubator that lets start-ups grow without the usual regulatory requirements and with financial supervision.
The article examines existing regulations and analyzes how the UK can develop an enhanced structure to save itself from losing its place as the financial centre of the world, due to stiff competition with other countries. The article provides options for Qatar to develop billion-dollar companies as well.
The paper argues for radical reforms that can both further attract and accommodate legitimate high-calibre fintech entrepreneurs, whilst offering strong client and investor protections to ensure financial stability. It proposes unprecedented legal and policy reforms for the sandbox structure, including a permissible model to capitalise on funding from amateur private investors worldwide.
The research, authored by Dr. Jon Truby, is published in the International Review of Law, Computers & Technology, is entitled Fintech and the City: Sandbox 2.0 policy and regulatory reform proposals. It can be accessed at https://doi.org/10.1080/13600869.2018.1546542.
The research is critical of the lack of ambition in the UK’s Financial Technology policy and suggests reforms to the existing Sandbox regime including:
• a Central Bank digital coin;
• real-time ‘view only’ access to the firm’s banking transactions and instant records of all contracts entered into (with provisions for client confidentiality and data protection obligations);
• introduction of an ICO platform and digital currency exchange (the Sandbox 100) providing further business opportunities;
• introduction of a SandCoin (Sandbox digital currency) that must be purchased and utilised to invest and trade with Sandbox firms;
• pre-approved ‘off the shelf’ methods of innovative funding including initial coin offerings (ICOs);
• one-stop shop for all investors to avoid the need for repeat registrations and anti-money laundering and customer verification documentations with every ICO or investment in Sandbox firms;
• e-registration and re-examination of the barriers to entry;
• compliance and intellectual property support;
• re-examination of tax incentives; and
• support for commercialisation of the technology.
The article proposes unprecedented reforms to the regulatory Sandbox enabling it to offer pre-approved rights for risk-assessed start-ups to gain access to the funding required to evolve. It does this by evaluating the regulatory qualities start-up entrepreneurs are seeking, balanced against suitable investor and client protections as well as ensuring financial stability.
Amongst its proposals are an authorised ‘off the shelf’ method of Initial Coin Offering funding, real-time ‘view only’ access to sandbox firm’s banking transactions to provide maximum transparency and confidence for investors and clients, and a centralised body undertaking AML/CFT and KYC checks for all investors to facilitate access to finance global investors. Furthermore, it proposes radical initiatives including both an exchangeable sandbox digital currency and official coin market exchange for sandbox digital currencies. It also proposes a form of e-registration enabling innovators worldwide to start-up and gain access to finance with appropriate protections for investors. Finally, it compares tax incentives with competitor jurisdictions and proposes further reforms outside of the sandbox.