How Singapore’s FinTech Regulatory Sandbox is helping fintech innovators accelerate time to market

Getting financial innovations tested and licensed by a progressive regulator is vital for fintech startups venturing into unexplored territory. The Monetary Authority of Singapore (MAS)’s FinTech Regulatory Sandbox – which comes in three variations to meet different needs - allows companies to do just that.

The Sandbox gives Singapore-based players a well-defined, live environment with guardrails, for instance types of customers and maximum value of transactions, in which they can freely innovate without worrying about full regulatory compliance during the sandbox period. Through the Sandbox, companies can safely test the viability of new fintech products using real money and clients, and also seek alternative paths to getting licensed.

ADDX: Claiming its Place in the World

Since its inception in 2017, homegrown private markets platform ADDX has been working to serve the financially underserved, by granting them direct access to private market assets from around the world.

In 2018, the company became one of the earliest participants in the Sandbox. With its robust controls, the Sandbox allowed ADDX to live-test its technology during the early stages, while mitigating risks commonly associated with blockchain.
 

As a Sandbox graduate, ADDX continues to win the trust of customers worldwide, and is growing quickly beyond its current reach of active users in 39 countries. “We have only scratched the surface of our potential investor base,” says Co-Founder & Group Chief Strategy Officer Darius Liu.

Through its Sandbox experience, ADDX found key investors in the Singapore Exchange (SGX) and Heliconia, and forged partnerships with law firms Allen & Overy and Allen & Gledhill, as well as professional services firm PwC Singapore. “Singapore is a global financial centre, which means there is a wide variety of collaborators to work with,” shares Liu.

The company’s product, engineering, and tech functions are all anchored in Singapore, a strategic decision based on the country’s strong governance, enabling digital infrastructure, and its 36 fintech international cooperation agreements.

BondEvalue: Democratising Bond Markets

Founded by international banking veterans in 2016, BondEvalue’s BondbloX is the world’s first and largest fractional bond exchange. The company’s product charters and business development teams are firmly established in Singapore.

By offering everyone the ability to buy bonds in smaller denominations through transparent, distributed ledger technology, BondbloX helps people invest in one of the world’s safest asset classes — global bonds.

“Although the bond market and our exchange’s reach are global, one’s home regulator — MAS in our case — is very important,” explains Chief Executive Officer Rahul Banerjee. A strong regulator, said Banerjee, must have the right balance: being open to innovative ideas while maintaining the overall safety and soundness of the financial system.

When electronic bond trading was incipient in 2016, there were no existing frameworks for BondEvalue to work within. MAS’ Sandbox Express option allowed BondEvalue to test the scalability of BondbloX within clear boundary conditions. “Without clear laws,  market innovation cannot take place,” Banerjee stresses, “new industries flourish under regulation”.

Banerjee cites the use of real money, transactions, and clients as one of the crucial and distinguishing features of MAS’ Sandbox schemes. During its Sandbox Express stint, BondEvalue was even able to connect with major financial institutions such as UOB Kay Hian and BondbloX’s current global custodians Citi and Northern Trust. “It was the predetermined testing environments within the Sandbox Express,” Banerjee elaborates, “that allowed BondEvalue to adopt a plug-and-play approach, and gave us a clear path to licensing within a shorter time frame”.

Embracing Fintech Diversity

Singapore’s progressive and open-minded approach towards new financial products and services has laid the foundation for a thriving fintech ecosystem. Since 2016, Singapore has seen its number of fintech companies quintuple to 1,400, and its fintech investments multiply 31 times to S$5.3 billion.

“Having an innovative idea that fits into Singapore’s vision as a global financial hub really helps with internal approval for Sandbox applications,” Liu advises interested firms. “Furthermore, as the Sandbox only lasts for a fixed duration, one should go in prepared as time is of the essence”.

Banerjee, for his part, encourages companies to “go for it” with the Sandbox and earn “confidence in the soundness and value of their innovation”.

Companies interested in the FinTech Regulatory Sandbox can submit their enquiries and applications via email to fintech_sandbox@mas.gov.sg.