CySEC launches regulatory sandbox — ‘another step in fostering responsible innovation’

CySEC launches regulatory sandbox — ‘another step in fostering responsible innovation’

The Cyprus Securities and Exchange Commission (CySEC) on Tuesday announced the official release of its regulatory sandbox, with the presentation of the launch taking place during an online event.

In its announcement, the commission said that “this initiative marks a significant milestone in the advancement of financial, regulatory, and supervisory technologies (FinTech, RegTech, and SupTech) in Cyprus”.

During the presentation, CySEC chairman George Theocharides stated that the commission’s vision “is to ensure that Cyprus’ securities market is one of the safest, most reliable and attractive destinations for investment”.

Furthermore, he mentioned that the regulatory sandbox is “helping us achieve this vision, while also addressing the challenge of keeping pace with ever-increasing developments in Europe’s financial sector”.

“Digitalisation”, Theocharides continued, “is reshaping the regulatory landscape in the financial industry”.

He noted that the trends that have been observed during the past decade in terms of financial services point to a steady increase in digitalisation, as well as further growth of online and mobile trading platforms.

“We have also seen the emergence of more sophisticated technologies, such as artificial intelligence, algorithmic trading, blockchain technologies, machine learning, Big Data Analytics, Robo – Advisors and social trading,” Theocharides said.

“Obviously, these global trends bring many opportunities, but at the same time, they come with risks – risks relating to the protection of the investors, to cases of money laundering and terrorist financing and risks around cybersecurity,” he added.

He also said that “as supervisors, we need not only to understand the challenges of digitalisation – to be watchful of the new and emerging risks – we also need to be able to leverage technology and innovation to swiftly deal with these risks and to support our supervision and increase efficiency”.

The CySEC chief also explained that the commission believes that maintaining high standards of investor protection and investor confidence in turn leads to the healthy growth of the market and encourages the development of innovative new products and services.

Additionally, he stressed that CySEC takes a technologically neutral approach to assessing innovation and financial technology.

He pointed out that these areas, which the commission monitors, should allow organisations under its supervision to be able to choose the most appropriate technology to meet their needs and requirements, and those of their clients.

“Indeed, the technology itself is not subject to supervision,” Theocharides said, noting that “it is when the service or end-product that the technology supports falls under CySEC’s regulatory framework that the sectoral rules apply”.

“In this case, it’s crucial that the specific risks associated with the technology being used are evaluated, addressed, and mitigated,” he added.

After the conclusion of the event, the CySEC chairman underscored that the commission’s newest initiative is particularly important for the development of the financial landscape in Cyprus.

“With the introduction of the regulatory sandbox, we are taking another major step in fostering responsible innovation in the financial services sector,” he said.

“Our goal is to support the development of cutting-edge solutions that meet technological advancements, without compromising market integrity and investor protection,” Theocharides added.

It should be noted that the virtual launch event attracted over 500 stakeholders from the financial sector, including representatives from regulatory bodies, financial institutions, and technologically innovative firms.

Finally, the attendees were briefed on the sandbox’s operational framework and the potential benefits for market participants.

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