Author: Hilary J. Allen Source: American University
Ten years after the UK's Financial Conduct Authority launched its fintech regulatory sandbox, this model has become globally popular, but the actual effects of its core principle—combining regulatory relaxation with guidance—still lack strong evidence. Existing evidence only shows that the sandbox benefits participating companies, but fails to prove its impact on the overall regulatory system or the widespread benefits of innovative outcomes. The two major concerns at the birth of the sandbox (the weakening of regulatory effectiveness and doubts about promoting regulatory learning outcomes) have not only persisted in practice over the past decade but have sometimes intensified. Although design optimizations can alleviate some issues, the fundamental challenge lies in the need to re-examine the sandbox model itself, especially in the current context of promoting generative AI innovation. Given the inherent limitations that are hard to break in the expansion of generative AI, and its significant negative impacts on privacy, intellectual property, and the ecosystem, rushing to boost AI is unwise.