First London. Then Shanghai. And later this year Denmark will also have a financial sandbox when the Danish FSA opens FT Lab for five select fintechs. According to a lawyer, Michael Camphausen, it is important that the authority discard rigid regulation – to a certain degree – to allow for actual financial experiments at the new playground.

In the second quarter of 2018 the Danish FSA is opening their financial sandbox, FT Lab. Five fintechs will be given the opportunity to test new technologies and business models in close collaboration with the financial institution.

The initiative will allow for authority and companies to better apply new technology and test business models within the financial sector. The opening of FT Lab is the culmination of years of lobbying.

One of the main initiators behind that lobbying is Michael Camphausen, who is a financial lawyer, a partner in the law firm Camphausen & Co and holds a ph.d. in financial regulation

“The opening of FT lab is the result of a year-long work effort, that – finally – manifests itself. Over the years we have, enviously, watched other countries open sandboxes. Now established fintechs and startups alike are given the same opportunity in Denmark,” says Michael Camphausen.

Innovation versus compliance

The Danish FSA highlights that the inhabitants of the FT Lab at all times are subject to current legislations. According to Michael Camphausen, however, it is essential that the authority continuously weighs between complete compliance and financial innovation.

“The sandbox must function as a real precursor, where you can test your business model or technolgy before the FSA imposes strict regulations upon the company. There must be room for ‘playing’ in the sandbox – so to speak – with real money and customers. That is the entire raison d’être of the initiative,” says Michael Camphausen.

By definition one of the principal functions of an authority is control. But according to Michael Camphausen they must let go of that control – to a certain extent.

A sandbox in balance

In 2016 the British government launched their sandbox initiative and last year the Financial Conduct Authority released a report on the learnings.

One of the conclusions was that the initiative had been a success. The road from idea to market had been shortened. Both financially and temporarily.

Michael Camphausen highlights that the initial success criterion for FT Lab first is to hit the ground running and evaluate and optimise the process from application to graduation.But for that to happen it is important that the five participants represent the diversity that the fintech ecosystem has.

“I hope that a wide range of startups will apply, but also more established actors such as a bank, who could enter with a specific project – perhaps in collaboration with a fintech startup. First and foremost, it is important that the sandbox is filled to the brim with a multitude of innovative technologies and business models,” says Michael Camphausen.

On March 7 Michael Camphausen, Deloitte and PressConnect is hosting an event in Copenhagen Fintech Labs premises that will cater to and prepare fintechs for the application process.

Meanwhile, the financial lawyer anticipates the opening of the sandbox later this year and urges stakeholder to observe or participate in the initiative with a sense of open curiosity.

“We should hold no prejudice, but instead observe how the fintech-ecosystem reacts to the initiative in a Danish context. The framework of the sandbox must adapt to the practical world – not the other way around. It must balance between two worlds. Between the companies’ innovation and the authority’s control. And we must remember that this is a new also for the Danish FSA,” says Michael Camphausen.

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