Regulatory sandbox

The European Supervisory Authorities distinguish two kinds of innovation facilitator in their joint report on regulatory sandboxes and innovation hubs. An innovation hub is a contact point where firms ask the supervisor how the rules apply to a new product and get non-binding guidance. A regulatory sandbox goes further: the firm tests its product under a testing plan that a dedicated team of the supervisor agrees and monitors.

A sandbox is no exemption from the law. The report states that sandboxes do not disapply requirements that follow from EU law, and the baseline is that a firm in a sandbox complies with all rules for its activity. The firm gains direct contact with the supervisor while the regulatory treatment of its model is worked out.

The ESA report counted five operating sandboxes when it was written: in the UK, where the Financial Conduct Authority started in May 2016, the Netherlands, Denmark, Lithuania and Poland. Most member states, Germany among them, had set up innovation hubs. The supervisors' facilitators now meet in the European Forum for Innovation Facilitators, described on regtech in Europe.

In the DACH region Austria is the example: the FMA runs a sandbox in four phases, limited to two years, described on fintech in Vienna. BaFin offers a fintech contact form that assigns a contact person to a firm, but it is not allowed to give legal advice.

The EU AI Act makes sandboxes a legal duty for AI. Under Article 57, every member state has to make sure its authorities set up at least one AI regulatory sandbox at national level. A firm that completes it can ask for a written exit report and use it in the conformity assessment of its system. For banks this matters because AI that sets a person's credit score is a high-risk use under the act.

For blockchain, the European Commission launched the European Blockchain Sandbox in 2023: three yearly cohorts of 20 use cases each, in which companies and public bodies discuss their legal questions with regulators. The law firm Bird & Bird runs it as lead contractor.

Finance Loop is the meeting place for compliance officers, regtech founders, lawyers and supervisors who deal with new financial products before the rules are settled. It connects the finance, IT and AI communities in Germany, Austria and Switzerland, with events in Frankfurt, Munich, Berlin and Hamburg.

Bird & Bird, lead contractor of the European Blockchain Sandbox, is one of Finance Loop's event and network partners. AI governance and the balance between innovation and regulation were themes of KI Exchange 2026 in Hamburg, a Payment & Banking conference that Finance Loop announced.

A scheme run by a supervisor in which a firm tests an innovative financial product, service or business model under an agreed testing plan, with the supervisor watching. The firm still has to comply with the rules that apply to its activity.

BaFin works with an innovation hub: its fintech contact point answers questions on licensing and assigns a contact person. In the ESA report Germany appears among the countries with an innovation hub, and in the region Austria's FMA runs a sandbox for fintechs. For AI, the AI Act requires a national sandbox in every member state.

A controlled setting under Article 57 of the EU AI Act where providers develop and test AI systems with guidance and supervision from the competent authority. At the end the authority can issue an exit report that the provider may use to show compliance.