Barriers Remain to Letting US Fintechs Play in the Regulatory 'Sandbox'

Michael Nonaka is quoted by The National Law Journal in an article regarding the likelihood that the U.S. will introduce a regulatory sandbox for fintech companies to test new products and business models without regulatory consequences. According to Nonaka, there is "great value" in a sandbox for entrepreneurs, but "in order for a sandbox to work, you have to get the buy in from all the different agencies." Even if that were possible to do, he says that with the dual banking system, the problem would "exacerbate tenfold" if state regulators were added to the mix. 

Nonaka also argues that class-action litigation could add to the complications of implementing a regulatory sandbox in the U.S. He explains that there would have to be education and disclosures notifying consumers about the sandbox and how it works. Otherwise, exemption from federal regulations would be futile because fintech companies would still be subject to potential liability in the form of class actions filed by consumers. "That's substantial and would have to be addressed in sandbox legislation."