FinTech sandbox: How Myanmar could be a leader in 2021

How Myanmar could be a leader in digital financial services by adopting “Sandbox”?

In recent years, Myanmar has seen the benefits of the latest developments in e-commerce and payments. While there is a hunger for Myanmar to emerge as the innovation leader in Southeast Asia; issues such as legacy rules and fragmented regulatory frameworks prevent this.

 One of the solutions discussed is the implementation of a Fintech Regulatory Sandbox to create an environment for innovative companies that goes beyond the legal limit.

What is FinTech sandbox?

A FinTech Sandbox (API) is an environment that innovators and testers can use to simulate the functionality displayed by the production environment in real-time to simulate the responses of all systems to which an application is connected.

 It enables banks and FinTech operators to experiment with innovative financial products or services in a defined and expensive space. In addition, having sufficient guarantees helps to limit the consequences of bankruptcy. Essentially, the sandbox offers pilot testing of newly developed technologies.

 A sandbox acts as a layer between banks and their innovation initiatives and facilitates collaboration between FinTech companies and incumbents. In addition, banks are no longer required to handle multiple requests for data (usually the first step in developing the solution), as the security area acts as a ready-made reservoir of process information.

Benefits of a FinTech sandbox

• Managing a product or business model through a sandbox helps companies manage regulatory risk during the trial period.

• There are no restrictions on the size of the transaction as the sandbox is in a UAT environment.

• A limited area can also allow for multiple partnerships between companies and legacy companies.

In Myanmar, a payment company in a limited regulated area can experiment with cross-border payment services and is exempt from legal action under Section 42 of the Stock Exchange Act [2012].

Global hubs have benefited greatly from this model. A success story at the South Korean Financial Services Commission (FSC), which has been working with a regulatory sandbox since April 2019. The FSC sandbox has expanded investments by about $111 million in new business and blockchain technologies and the country’s advanced technologies.

 By applying this model, Myanmar can increase its tax revenue from applications generated in the regulatory sandbox and ultimately pay corporate taxes to successful companies that exit the sandbox.

 The limited regulatory area could boost the confidence of local companies and foreign investors to do business in Myanmar.

 Moreover, Myanmar can restore the stigma as a country where about 70% of the people do not have a bank account, furthering the development of cryptocurrency and blockchain technology.

 Myanmar does not allow illegal cryptocurrencies as a means of payment and CBM has been a fierce opponent. In 2019, the CBM announced that it does not recognize cryptocurrencies as commercial currencies, putting them in a sort of gray zone under Myanmar’s law.

 Sandboxes allow companies and businesses to test new payment methods in a controlled environment, educate regulators about how fintech products work and how to better regulate the government.

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