“Regulatory Sandboxes” in Russia: New Horizons and Challenges

Abstract

“Regulatory sandboxes” are regarded as a special mechanism for setting up experimental regulation in the area of digital innovation (especially in financial technologies), creating a special regime for a limited number of participants and for a limited time.Russiahas its own method of experimental regulation, which is not typical but may be helpful for other jurisdictions. There are three approaches to legal experiments (including digital innovations) inRussia. The first approach is accepting special regulation on different issues. There are recent examples of special laws (e.g. Federal Law on the experiment with artificial intelligence technologies inMoscow). An alternative to this option is establishing experimental regulation by an act of the Government if legislation does not prohibit it (e.g. labeling with means of identification). The second approach deals only with Fintech innovations and provides a special mechanism to pilot models of innovative financial technologies. The participants of such a “sandbox” may create a close-to-life model in order to estimate the effects and risks. If the model works fine, the regulation may be amended. The third approach works with creating a universal mechanism of real-life experiments in the sphere of digital innovations based on the special Federal Law and the specific decision of the Government of theRussian Federationor the Bank of Russia in the financial sphere. The author compares the three approaches and their implementation within the framework of Russian legislation and practice and concludes that this experience may be used by developing countries with inflexible regulation, in order to facilitate the development of digital innovations.