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The New Way to Deregulate

Offering exemptions from many consumer protection rules is meant to spur fintech innovation, but it could lead to abuse.
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Illustration: Josh Freydkis for Bloomberg Businessweek

Sandboxes are the hot trend in financial regulation. Or rather, deregulation. China, Singapore, Australia, Canada, and more than 20 other countries have them. U.S. regulatory agencies are starting them. Arizona has one, and other states may follow suit.

Sandbox programs are supposed to be a kind of safe space to allow digital entrepreneurs to test products without regulators breathing down their necks. Governments are willing to stay their regulatory hand because the startups that emerge from such experiments might lead to new jobs and expanded access to financial services. They also provide competition to big banks. There’s even a sandbox for sandboxes: Regulators in 12 countries have agreed to experiment with financial technology across borders.