PHOENIX—Arizona Governor Doug Ducey (R) has signed House Bill 2434 into law, which makes Arizona the first state in the United States to enact a fintech regulatory “sandbox.”
The bill was sponsored by Rep. Jeff Weninger (R) and drafted by the Office of Arizona Attorney General Mark Brnovich. Arizona joins countries such as the United Kingdom, Singapore, United Arab Emirates, and Australia in encouraging fintech investment by instituting sandboxes, JDSupra.com reported.
“Currently, it can take a startup several months and tens of thousands of dollars in fees, compliance costs, and legal expenses to navigate the regulatory maze in just one state. This slow-moving and expensive process can be very frustrating, challenging, burdensome, and unwieldy in an industry such as fintech that is rapidly changing and developing,” JDSupra.com said.
Arizona’s sandbox will allow startups, entrepreneurs, and even established companies to launch products on a limited, temporary scale to consumers to test innovative products, services, business models, and delivery mechanisms in the real market without incurring the regulatory costs and burdens that would otherwise be imposed. The bill also includes a reciprocity provision permitting the Attorney General to enter into agreements that would allow Arizona sandbox participants to operate in other jurisdictions that establish similar programs. The Arizona Attorney General’s Office will administer the sandbox, JDSupra.com reported.
“The idea of a regulatory fintech sandbox is not new, and while it’s being discussed at the federal level, Congress is moving at a glacial pace. Arizona has always been a state for big ideas and this is just one more place where we are trailblazing in entrepreneurship and innovation. I hope to see the sandbox serve as a catalyst for capital investment in Arizona and provide opportunities for Arizona businesses and consumers to thrive,” stated Attorney General Brnovich.
According to JDSupra.com, key aspects of Arizona’s regulatory sandbox program include:
- The Office of the Arizona Attorney General is responsible for approving and providing entry of applicants into the sandbox
- The sandbox program will be administered by the Civil Division of the Office of the Arizona Attorney General
- The regulatory sandbox will likely be active and ready to accept applications by late 2018
- Application fee amounts will be determined by the Arizona Attorney General’s Office at a later date
- Sandbox participants must provide detailed information regarding their service or product on a form prescribed by the Arizona Attorney General’s Office
- Sandbox participants will have 24 months after their approval date to test their innovative financial product or service
- A sandbox participant may be granted an extension of up to one year upon request to the Arizona Attorney General’s Office
- Consumers must be Arizona residents
- The sandbox provides caps on the numbers of individuals who may participate in a particular sandbox agreement and caps on the amount of loans that may be issued
- The Arizona Consumer Fraud Act guides all products and services offered in the sandbox and any product offered in the sandbox must comply with all statutory limits and caps in Arizona law related to financial transactions
- The program ends on July 1, 2028