Keeping up with Innovation: Designing a European Sandbox for Fintech

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Wolf-Georg Ringe, Christopher Ruof

In the aftermath of the 2007-09 global financial crisis, regulators in all major jurisdictions introduced significant new requirements for financial firms. Certainly justified in purpose, these regulations have increased market barriers, both directly through specific obligations, and indirectly through the sheer magnitude and complexity they involve. Regulators primarily focused on bolstering financial stability and consumer protection, while frequently disregarding their objective of promoting financial innovation. Ten years after the crisis, it is time to reconsider the appropriate balance between those objectives.

In this commentary, the authors show how EU financial regulation may stifle the innovation of financial services. Using the example of automated investment advice, so-called ‘robo-advisors’, they show how a proper balance between regulatory objectives could be achieved through establishing a ‘guided’ regulatory sandbox.

Wolf-Georg Ringe is Professor of Law and Director of the Institute of Law & Economics at the University of Hamburg as well as a Visiting Professor at the University of Oxford. Christopher Ruof is Research Associate at the University of Hamburg.