Brazil intends to launch a regulatory sandbox for its financial, security and capital markets. According to a recent announcement, the initiative will bring together four government departments and is a response to the recent advances in technology.
The initiative brings together Brazil’s Central Bank, the Ministry of Economy, the Securities and Exchange Commission and the Superintendent of Private Insurance.
In recent times, new technology such as blockchain, artificial intelligence and robotics have impacted greatly on the financial, capital and insurance industries. It has led to the emergence of new business models which have enabled market participants to offer higher quality services. It has also brought with it new challenges for regulators, the announcement stated.
These technology advances require regulators to adapt, especially in regard to the market regulations. They must ensure that the new innovations under their jurisdictions adhere to compliance requirements, regardless of how the services or products are delivered.
The sandbox will allow the four regulators to understand the new technology and how to regulate it, all without limiting innovation. They will be able to “grant temporary authorization and justified exemption of compliance with rules for specific regulated activities, observing previously established criteria, limits and periods,” the announcement stated.
Further, the regulators will collaborate to formulate joint regulations for activities that transcend one regulated market.
The largest economy in the South American region and the world’s eighth-largest, Brazil has a thriving financial industry. However, it still lags behind its peers, such as South Korea and Canada, in technological advances. For instance, there are over 55 million unbanked adults in the country, representing over 25% of the population. In contrast, Canada’s unbanked population stands at just 3%. The regulatory sandbox is a crucial step in bridging this gap, allowing the country to take advantage of new technology without risking the health of its financial services industry. As the announcement stated:
“It is hoped that the implementation of this regulatory regime will be able to promote the development of products and services that are more inclusive and of higher quality and that can foster constant innovation in the financial, security and capital markets.”
The country has taken to crypto, with the government recently forming a committee to regulate the crypto industry. This was after a wave of crypto-related crimes including a $210 million crypto scam that duped over 50,000 victims as well as a series of crypto money laundering incidents.
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