Arizona has become the first state to launch a regulatory sandbox to promote innovation and development in emerging technologies in the financial industry.
A regulatory sandbox allows companies to test their products in a limited environment while granting regulatory relief for those entities. Companies approved by Arizona Attorney General Mark Brnovich, whose agency will oversee the sandbox, will be able to test their products for up to two years and can serve up to 10,000 Arizona residents before needing to apply for formal licensure.
"With the signing of H.B 2434, Arizona will become the ultimate sandbox for the development of Fintech," Arizona Gov. Doug Ducey tweeted after signing the bill. The program is set to take effect later this year.
This is not the first push for a regulatory sandbox in the U.S. A bill introduced in the U.S. House of Representatives in 2016 emulated the U.K.'s sandbox program; however, attempts to create a national sandbox program have not come to fruition. Several other countries have previously adopted similar programs, including Singapore, Australia, Canada, South Korea and Mexico, among others.
Brnovich said the program was created in part because the regulatory agencies that oversee the fintech and blockchain industries have hit a stalemate, and Congress has not yet taken steps to create a national program, Forbes reported. He has been calling for a sandbox in Arizona for over a year.