Arizona Pioneers First Blockchain Regulatory Sandbox For FinTech Companies In The U.S

Big win for blockchain firms following the signing of a new bill into law by Arizona’s Governor, Doug Ducey, allowing Arizona to become the first state to introduce a regulatory sandbox in the U.S.

A regulatory sandbox is a framework that allows businesses to temporarily launch a product or a service at a limited scale. This allows startups and businesses to test innovative business products and services, especially in the fintech market.

Startups are usually subjected to heavy compliance costs, legal costs and compliance fees among other expenses as part of the regulatory process in each particular state where they want to launch their operations. These charges dig deeper into the already limited funds that startups have, thus threatening the success of the project. Additionally, the regulatory processes are usually slow and lengthy, thus leading to a lot of frustration for startups.

Regulatory sandboxes offer an ideal solution for startups to overcome the limitations involved in the regulatory process in states. For example, the temporary run allows businesses to pilot their products or services without having to go through the lengthy procedures and also without having to incur the hefty regulatory expenses.

Arizona has become the first state in the U.S to offer a regulatory sandbox courtesy of the recent signing of House Bill 2434 into law by Governor Doug Ducey. It is the first of its kind in the United States but sandboxes are not a new concept. Numerous other countries including Singapore, Australia, Bahrain, the United Arab Emirates and the United Kingdom have all already launched regulatory sandboxes, allowing startups to test new products and services without being limited by regulations.

The new law in Arizona also includes a different provision that covers reciprocity, allowing the Attorney General to strike deals with other states that will offer similar regulatory sandboxes. This means more states are expected to introduce regulatory sandboxes. This also means startups will be able to enjoy the benefits offered by sandboxes in multiple states as long as the benefits are similar.

Attorney General Mark Brnovich had this to say about the new law through a press release: “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.”