Businesses developing financial technology (fintech) products and services have been given the opportunity to operate under a light-touch regulatory regime in Dubai by the city state's financial services regulator.
The Dubai Financial Services Authority (DFSA) said the move, which will see successful applicants operate under an 'innovation testing licence' for between six months and a year, or potentially for longer in "exceptional cases", is designed to "foster innovation in Dubai".
"The restricted financial services licence will allow qualifying fintech firms to develop and test innovative concepts from within the Dubai International Financial Centre (DIFC), without being subject to all the regulatory requirements that normally apply to regulated firms," the DFSA said. "The DFSA will work with applicants to understand the business proposal and establish the appropriate controls for the safety of any customers involved, on a case-by-case basis."
Fintech businesses that operate under the innovation testing licence could obtain full authorisation to operate in Dubai when their licence expires, the regulator said.
"If a firm has met the outcomes detailed in the regulatory test plan, and it can meet the full DFSA authorisation requirements, it will migrate to full authorisation," the DFSA said. "If it does not, the company will have to cease carrying on activities in the DIFC that need regulation."
The framework outlined by the DFSA has parallels with the regulatory sandbox testing that other regulators across the world, including in the UK and Singapore, have provided for in the fintech market.
Ian Johnston, chief executive of the DFSA, said: "Fintech is changing the landscape for financial services, providing more opportunities to seek financing and increasing financial inclusion. As regulators, it is our responsibility to provide a framework which supports the sustainable development of this industry while protecting consumers and financial stability."
Earlier this year, the DFSA proposed a new regulatory regime specifically for loan-based crowdfunding.
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