Cyprus Securities and Exchange Commission

Overview & Objectives

Building upon HCMC Regulator’s ongoing dialogue with market participants and experts since the launch of the Innovation Hub, HCMC Regulator has proceeded with the establishment of its Regulatory Sandbox. HCMC Regulator seeks to strike a balance between technological innovation, investor protection, and market integrity. HCMC Regulator seeks to achieve this through the launch of the controlled testing environment of HCMC Regulator’s Regulatory Sandbox.

The Regulatory Sandbox aims to:

build a transparent channel of cooperation between entities developing technology-based solutions in the financial services falling within HCMC Regulator’s supervisory mandate and HCMC Regulator,
ensure that the regulatory landscape evolves in line with the technological developments in the financial services.

The HCMC Regulator Regulatory Sandbox is designed for both regulated and unregulated firms to test with HCMC Regulator their technologically innovative solutions and/or products related to financial activities which are subject to HCMC Regulator’s supervision. The testing of pioneering products, services, and business models within a controlled, time-bound, testing environment will enhance HCMC Regulator’s understanding of innovative technologies and facilitate continuous regulatory adaptation to new market developments.

Why join?

Sandbox participants will be provided with the unparalleled opportunity of small-scale testing their innovative products and services within a controlled environment. With HCMC Regulator’s close monitoring and guidance, eligible participants will receive constructive feedback on how the regulatory framework applies to their innovation.

Eligibility criteria

The HCMC Regulator Regulatory Sandbox welcomes regulated entities as well as unregulated entities engaging in financial innovation through the deployment of technology, where such innovation relates to a service or product, regulated by HCMC Regulator. Unregulated entities can participate by:

obtaining prior HCMC Regulator authorisation corresponding to the regulated services they purport to engage in; or
testing innovative solutions solely with entities within their corporate group or by availing of any other exemption provided for under the applicable framework; or
by performing demo services; or
entering into a collaboration agreement with a HCMC Regulator-regulated entity.

For the avoidance of any doubt, the Sandbox does not provide a space of “light touch” regulation and supervision. Any unregulated entities whose innovations involve the provision of regulated services must obtain a HCMC Regulator authorisation as stated above, prior to participating in the Sandbox.

In addition, the applicants’ proposed innovative solution must

directly or indirectly facilitate activities within HCMC Regulator’s supervisory scope,
introduce authentic innovation in terms of product, service or business model,
showcase readiness for testing (i.e. that the proposed innovation is mature enough to be tested in a production environment) , and
benefit the financial services industry.