On 14 November, Law 7/2020 on digital transformation of the financial system entered into force, which establishes and governs the first regulatory sandbox in Spain. The following are the main aspects of Law 7/2020.

The sandbox will offer a controlled testing environment to allow for the implementation of innovative technology projects in the financial services sector, particularly in connection with banking, investment services and insurance. The environment will be safe for participants to test new financial products and services, while ensuring that the stability of the financial system is maintained and potential risks are eliminated or adequately mitigated.

In order to access the sandbox, projects must contribute to technological innovation in the financial system, be sufficiently advanced to be tested and create added value in areas such as improved compliance with regulatory requirements or client protection and the enhanced provision of financial services.

Project promoters (technological entities, financial entities, associations representing interests, public and private centers of investigation) and regulators will enter into a protocol to establish the rules and conditions to which the projects and testing will be subject.

Guarantees and protections will be afforded to sandbox participants, including informed written consent, personal data protection, rights of withdrawal, promotor liability, guarantees covering promotor liability, confidentiality and, for the regulators, the option to end testing in cases of bad practices or failures to comply with the protocol rules. 

Entities that participate in the sandbox may have expedited access to regulatory authorisation.

Within one month the application form to access the sandbox will be approved and the first date for filing applications will be set. After that time, the sandbox will be launched.

Law 7/2020 offers an excellent opportunity for new entities to access the financial system and develop better financial services and products.