Designing regulatory sandboxes: a comprehensive framework for aligning functionalities and objectives

Abstract

Regulatory sandboxes have been introduced in jurisdictions worldwide, providing a controlled testing environment for piloting new technologies such as autonomous vehicles and FinTech. We present a general framework for designing a regulatory sandbox that policymakers can operationalize. Within the general framework, we introduce three types of sandbox functionalities: exploratory, confirmatory, and on-demand that can be combined to achieve a range of objectives. The characteristics of each functionality type are presented as distinct design choices, enabling policymakers to design sandboxes along multiple dimensions. The framework emphasizes a deliberative approach for determining whether to introduce a regulatory sandbox, taking into account several factors, including the rationale for undertaking a legal experiment, the existence of experimental legislation, and the limits imposed by current legislation. This article contributes to the literature by providing a comprehensive framework for designing regulatory sandboxes.