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Ministry of Industry and Trade (MIT) and CzechInvest will support startups in the field of financial innovation and technology. Digital Regulatory Sandbox will be created

25.03. 2024
line-arrow Ministry of Industry and Trade (MIT) and CzechInvest will support startups in the field of financial innovation and technology. Digital Regulatory Sandbox will be created

The government, on the proposal of MIT, has approved the creation of Digital Regulatory Sandbox to support fast-growing companies such as startups and spin-offs in the area of financial innovation and decentralised technologies. Sandbox will provide selected participants with various forms of support ranging from comprehensive and independent advice, through legal consultation in newly regulated areas not only in the financial market, to technical testing of innovative products. The CzechInvest Agency will launch the sandbox in cooperation with universities and fintech associations by the end of the first half of this year.

“In order for small and medium-sized enterprises to successfully implement new fintech technologies in accordance with Czech and European regulatory requirements, they need to thoroughly test their products and services. Our goal is to support their innovations as much as possible, so we will launch a special platform, the so-called sandbox, which will allow startups and spin-offs to develop new innovative products, experiment with them and check whether their solutions will meet the relevant legislative conditions. Thanks to this, we will help entrepreneurs to reduce start-up costs and increase their competitiveness, thus supporting the Czech fintech community in international competition,” says Minister of Industry and Trade Jozef Síkela , adding that the sandbox builds on the Technology Incubation project, through which the CzechInvest agency supports a number of innovative areas such as space technology or artificial intelligence.

A regulatory sandbox is generally a tool that allows companies to verify that new technologies and products will meet all regulatory requirements. One of the first areas of success in the European Union (EU) and globally is in the area of financial and decentralised technologies. An example is e.g. EU Blockchain Regulatory Sandbox, set up by the European Commission. In the first phase, the Czech sandbox will therefore focus thematically on fintech and help companies to check what regulatory requirements will be imposed on them and to prepare for the relevant procedure for a permit to operate, if required. Subsequently, the experience can be used in other areas that are gradually affected by regulation. Gradually, the consultation and expert assistance with regulation and business model will be joined by a technology part for testing the products themselves in a controlled environment before their deployment on the market.

In addition to the MIT, the Ministry of Finance is also involved in the preparation of the sandbox. “We see the regulatory sandbox as a suitable tool that will motivate the creation of new companies in the FinTech and DLT sector, and thus the faster development of innovation in the field of financial services in the Czech Republic,” said Finance Minister Zbyněk Stanjura.

In terms of efficient use of public funds, it is important for the MIT to achieve synergy with other business support programmes already implemented within the CzechInvest agency. The digital regulatory sandbox project has the potential for further use in supporting business in various areas that are subject to new rules and regulations, where innovative technologies and customer services are rapidly evolving.

The project is part of the National Recovery Plan (NRP) under the title “Digital regulatory sandbox in line with EU priorities” (translation of the commonly used term regulatory sandbox). The budgeting of the investment is based on similar principles to those common in other EU countries (e.g. Austria), where the costs incurred are budgeted for the individual companies supported – the sandbox participants.

The majority of the funds will thus be provided for business services and the establishment of a technical testing environment. The specific amount will depend on the project submitted by the CzechInvest agency and its partners to the call for proposals issued by the MIT. The investment will be fully covered by the NRP and will not burden the state budget. Its maximum allocation is CZK 150 million, but it may not be exhausted in its entirety and it will depend on the further usability of the built infrastructure, e.g. to support other innovative areas.

“The specific setup and launch of the sandbox is the content of the first phase of the project. It will therefore be the content of the application submitted by the CzechInvest agency together with its partners. We assume that the operation will be similar to other successful sandboxes abroad, where we are taking inspiration. We are trying to set up the project to help entrepreneurs as much as possible, of course within the framework of what European legislation will allow us to do,” says Petr Očko, Senior Director of the MIT Digitisation and Innovation Section and Director in Charge of the CzechInvest agency.

The preparatory work has been going on for a long time, but the government approval is an important milestone from which the project can start implementing the NRP. “In the second implementation phase, the programme will involve the selection of highly innovative companies, which will be provided, among other things, with professional consultations by independent experts. Representatives of regulatory and supervisory authorities will also participate in presentations and discussions with the participants. For public institutions, on the other hand, gaining insight into the workings of highly innovative services that enter the market and thus enrich their own know-how is a major benefit. In this way, regulatory sandboxes are contributing to the development of the financial ecosystem, not only for similar institutions abroad.” adds Očko.

David Horinek

PR Manager and Spokesperson

+420 724 591 667 david.horinek@czechinvest.org

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