New legislation-backed legal protections to Taiwan’s fintech startups, a first for the world, will help the small experimental firms compete against major banks with little risk of criminal activity or intellectual property breaches.
In December, the legislature in Taiwan gave final approval to the “Act on Financial Technology Innovations and Experiments.”
Per this bill, fintech startups will be able to circumvent most financial regulations except those related to hacking and money laundering.
Protections will let startups do core work, such as processing third-party e-commerce payments, operate without the capitalization of a major bank.
They also remove otherwise budget-breaking fines for other cryptocurrency firms.
Fintech founders that want protections under the bill must be informed within 60 days.Successful applicants are similarly bound to produce results before a review after 18 months.
Globally viable sandbox
The regulations essentially let fintech startups break the law for three years as they perfect their business models. Startups call these protections a sandbox -- a safe, controlled environment where innovation is encouraged, monitored, and tested.
Australia, Britain, Hong Kong and Singapore have adopted similar measures to cultivate their fintech industries.
Taiwan took its fintech field a step further by putting the measures into law ensuring such protections could be longer-lasting, or at least not prone to whims of successive administrations.
In Britain, a review board decides which startups get protected sandbox status. The authors of Taiwan’s legislation worried that local regulators lacked the vision or experience to judge fintech ventures.
Legislator William Tseng worried that regulators wouldn’t be able to evaluate sandbox applications because they involve multiple fields of expertise such as cloud computing, telecommunications, social media and big data, per a Business Next report on December 29.
For this reason, the initial regulatory sandbox bill proposal mandated that at least half of advisory review board be staffed by academics and industry experts.
But some lawmakers argued over final days of debate in late-December that staffing the regulatory board with industry people could lead to intellectual property theft, because reviewers would get direct access to innovative technology in the developmental stage.
DPP Legislator Karen Yu, who authored the initial regulatory sandbox law, eventually agreed that limiting the number of external reviewers to better ensure the confidentiality of applicants.
Parliament eventually agreed to make external members “not less than one-third but no more than one-half” of the review board.
That concession allowed the bill to pass its third and final reading, gaining approval from 69 of 113 lawmakers.