Introduction
Bill Gates once said, “The effectiveness of a system depends on the harmony of its parts.” This article explores the concept of regulatory sandboxes as a means to foster innovation while mitigating risks. However, the effectiveness of this approach in Mexico has been called into question due to a lack of successful implementations.
The Sandbox Regulatory Concept
A regulatory sandbox is envisioned as a safe space for controlled experimentation with novel models, allowing them to evolve into new entities while minimizing associated risks. This concept aims to encourage innovation and creativity within sectors that appear saturated.
Mexico’s Regulatory Sandbox: A Closer Look
In Mexico, the regulatory sandbox concept seems to be primarily associated with the National Banking and Securities Commission (CNBV). However, this perspective overlooks other relevant authorities mentioned in the Financial Technology Regulation Law (Ley Fintech), such as the National Insurance and Pension System Commission, the Bank of Mexico, and even the Ministry of Finance and Public Credit. Analyzing the outcomes from these institutions is crucial to understanding the sandbox’s effectiveness.
Historical Context and Legal Differences
The regulatory sandbox concept originated in the UK in 2014. The Financial Conduct Authority (FCA) has since provided valuable insights, though their portal’s outdated information makes it challenging to gather up-to-date data. Nonetheless, between 2018 and 2022, the FCA reported receiving approximately 2,400 requests, supporting 867 companies—168 of which were explicitly within the financial sandbox’s scope.
The legal systems of Mexico (Romano-Francés or Civil Law) and the UK (Anglo-Saxon Law) differ significantly. Mexico’s system emphasizes precision, universality, and foresight, leading to greater rigidity. Conversely, the Anglo-Saxon system allows for more agility and flexibility in creating law through case-by-case interpretations by administrative or judicial authorities.
Legal and Regulatory Challenges in Mexico
Mexico’s legal framework presents unique challenges. Private law generally follows the “anything not prohibited is permitted” principle, while public law adheres to “anything not expressly permitted is prohibited.” This discrepancy becomes crucial when dealing with financial regulations, as public servants applying these laws are also subject to administrative, pecuniary, and penal responsibilities.
Instances of financial entities violating laws have resulted in negative consequences for their clients, including loss of assets. These situations highlight the complexity and potential repercussions when exceptions are made to congressionally approved laws like the Credit Institutions Law, Popular Savings and Credit Law, Fintech Law, or Insurance Contract Law.
The Need for Legal Adaptations
Juridically, the sandbox figure implies that a group of officials authorize non-enforcement of a law under their responsibility, seemingly for potential benefits. However, this approach does not guarantee that clients won’t be adversely affected, nor does it clearly outline officials’ responsibilities in case of a novel model’s failure and subsequent harm to financial system users.
Furthermore, it is essential to examine the normative and jurisprudential scope of public servants’ discretionary powers and the genuine applicability of the Ley Fintech’s sandbox definition, which requires technology-driven financial service provision with novel modalities not present in the market at authorization time.
Conclusion
Organ transplantation serves as an analogy: despite compatibility tests, rejection remains a possibility. Similarly, Mexico’s failure to consider the broader systemic impact when developing novel models has led to minimal progress. To turn the sandbox concept into reality, Mexico must implement complementary and pertinent legal adjustments that ensure all involved financial authorities operate with due diligence, safeguarding against potential negative consequences.
