Sandboxes – Providing Stability to Innovation Part 1: MFSA FinTech Regulatory Sandbox

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Av Matteo Alessandro

‘Yes’ or ‘no’ to Regulatory Sandboxes? Av. Matteo Alessandro explains in detail what regulatory sandboxes are. Also, what solutions they provide, and crucially, the key features of the MFSA FinTech Regulatory Sandbox. Feel free to get in touch with for further queries.



Innovation is the driving force behind economic growth. This is especially true for the FinTech and tech industries, being at the forefront of this trend. Nevertheless, with innovation comes risk, notably in highly regulated industries such as finance and technology. This is where regulatory sandboxes come in as a solution to help companies navigate through the complexities of regulatory compliance, while still fostering innovation.

In Malta, two such sandboxes are available for businesses to explore. The FinTech Regulatory Sandbox provided by the Malta Financial Services Authority (MFSA) and the Technology Assurance Sandbox by the Malta Digital Innovation Authority (MDIA). Both of these sandboxes provide a safe space for businesses to test new products and services in a controlled environment, with reduced regulatory burden and greater flexibility. This article is the first in a series of two articles focusing on sandboxes. We explore the benefits of the FinTech Regulatory Sandbox for innovative businesses in Malta. Also, how it can help drive the growth of the FinTech and tech industries in the country.

chip Tech industry Innovation industry Regulatory Sandboxes MFSA FinTech Regulatory Sandbox Crypto Fintech industry Tech industry

FinTech Regulatory Sandbox


The FinTech Regulatory Sandbox, offered by the MFSA, offers a secure regulatory framework for FinTech companies to test their innovative products and services within the financial services sector in Malta. With prescribed conditions in place, this initiative promotes sustainable innovation whilst providing real value and protection to financial service consumers.

Additionally, the Sandbox fosters legal certainty in the market and facilitates knowledge sharing through collaborative dialogue. This article delves into the key features and benefits of the MFSA FinTech Regulatory Sandbox, and how it is driving innovation in the financial services industry in Malta.

Objectives of the FinTech Regulatory Sandbox


The FinTech Regulatory Sandbox established by the MFSA aims to achieve several objectives. Firstly, it fosters innovation by providing a regulatory environment that enables technologically-advanced financial innovation. This includes new business models, applications, and processes or products, to operate within the financial services market.

Secondly, the MFSA closely monitors participants to ensure that their innovations truly offer value to consumers and the wider financial services sector. whilst ensuring investor protection, market integrity and financial stability, thus promoting sustainability. Thirdly, the Sandbox enhances legal certainty within the financial services market, providing both participants and the MFSA with a space to determine the appropriate requirements under applicable regulatory frameworks. Lastly, through collaborative efforts with participants, the MFSA will have the opportunity to enhance its regulatory knowledge and assess the implications and gaps of such solutions, identifying the appropriate response as necessary.

Scope and Eligibility Criteria of the Fintech Regulatory Sandbox

The MFSA FinTech Regulatory Sandbox welcomes individuals who wish to develop technology-enabled financial innovations. These may result in new business models, applications, processes or products. In turn, that may have a significant impact on financial markets and the provision of financial services. However, there are four eligibility criteria that must be met to participate in the Sandbox. Eligible persons may include both regulated and unregulated FinTech service providers, as well as technology providers.


“The Solution shall be (i) technology-enabled and (ii) innovative, resulting in new business models, applications, processes or products within the financial services sector.”


The MFSA FinTech Regulatory Sandbox has established specific eligibility criteria centred around innovation. These include a clear indication that the proposed solution leverages existing or emerging technologies in an innovative way to provide or support financial services. Inadvertently, this is a clear demonstration that the solution differs significantly from current offerings, and evidence that the solution is not simply a rebranding, scaling up, or re-engineering of existing business models, applications, processes, or products in the financial services market. Furthermore, the MFSA aims to prioritise solutions that have few or no comparable alternatives. Applicants must be able to demonstrate that their solution meets these innovation criteria to be considered for participation in the Sandbox.


“There should be a genuine need to test the Solution in the Sandbox with clear outcomes in accordance with the scope of the Sandbox being to identify any inherent regulatory gaps, challenges and risks.”


The MFSA FinTech Regulatory Sandbox has established eligibility criteria. These are based on the need for the solution being tested and the appropriateness of the regulatory approach to assess its risks, challenges, and potential regulatory and supervisory gaps. Applicants must demonstrate that the Sandbox will be beneficial for the solution being tested. They must also demonstrate that it is the appropriate regulatory approach to engage with the Authority and release the solution within the financial services market. These criteria ensure the Sandbox’s effective and efficient use to meet applicants’ needs seeking to test innovative financial solutions.


“The Solution should provide identifiable value added by addressing a problem or bring identifiable benefit/s to the consumers and/or financial sector; and (ii) be sustainable from an economic and financial point of view.”


The MFSA FinTech Regulatory Sandbox has established eligibility criteria. These are centred around the benefit of the proposed solution. These include demonstrating that the proposed solution offers a significant increase in efficiency and user experience. The criteria also require applicants to show a decrease in cost compared to current products on the market. Applicants must also demonstrate that the proposed solution is beneficial to consumers and the wider financial services market. Consequently, applicants must also show that they have accounted for potential negative externalities. 

A well-thought-out plan accounting for possible risks is also required. Applicants must present  a suitable mitigation plan ensuring consumer protection, market integrity, and financial soundness. Furthermore, applicants must demonstrate that the proposed solution can be discontinued with minimal impact to consumers and the financial services market. Finally, applicants must show that the proposed solution captures an otherwise underserved niche market, increases financial inclusion, or enhances the competitiveness of the financial services market. These criteria ensure that the Sandbox is used effectively to promote beneficial financial innovation.



“The Solution should, at the time of commencement, be released or ready for release to the client and/or financial service provider and the Applicant should have adequate financial and operational resources to operate throughout the duration of the Sandbox.”


The MFSA FinTech Regulatory Sandbox has established eligibility criteria. These are based on the readiness of the applicant and the proposed solution. Applicants must demonstrate that they have the operational capacity to operate for the foreseeable future and have strong financials that indicate adequate resources. The proposed solution should also be ready for release to the public. Additionally, Sandbox applicants should secure the necessary partners through the applicable contractual agreements and/or outsourcing contracts with one or more authorised financial services providers (FSPs), as applicable. These criteria ensure that the Sandbox is used effectively to promote financially-stable and sustainable innovation in the financial services sector.

Regulatory Sandboxes MFSA FinTech Regulatory Sandbox Crypto Fintech industry Tech industry Innovation industry payment methods financial innovation regulatory compliance Financial Service Provider CSP

The Evolving Landscape of the Digital World

Cryptocurrency undoubtedly possesses significant potential to revolutionise the future of money. It has, and continues to face substantial difficulties and scepticism. Yet, it continuously proves to be a viable replacement to traditional means of payment. The world is becoming increasingly digital and the need for fast and cheap forms of payment is rising. As a result, payments via cryptocurrency are becoming an increasingly attractive concept. This is especially true in emerging markets.

The role of cryptocurrency in the future of money is still evolving. Although it may not entirely replace traditional payment methods, its potential to coexist cannot be ignored. As society continues to embrace digitalisation, it is safe to say that cryptocurrency in the future will only continue to evolve.

Lifecycle Stages of the FinTech Regulatory Sandbox.

The lifecycle of the Sandbox consists of four stages.

  1. The proposal stage. At this stage, interested persons submit proposals and undergo an eligibility assessment to ensure the criteria is met.
  2. Once the proposal is approved, the application stage begins. For regulated FSPs, authorisation is required under sectoral law. Thus, technology providers and unregulated FSPs must provide integrity confirmations. Once this is done, the framework is tested.
  3. The testing stage is next, and it is the core of the Sandbox. It takes place over a period of either 6 or 12 months, depending on the nature of the proposal. During this period, the innovation is tested, and its effectiveness and impact on the financial services market are evaluated. Participants have a one-month evaluation period to compile the final report on their innovation and its outcome.
  4. Finally, the exit stage is reached, where the participant prepares an exit strategy. This includes plans for scaling up the innovation and integrating it into the financial services market or discontinuing it. The MFSA will also evaluate the success of the innovation and its impact on the market. The Sandbox lifecycle provides a structured approach to innovation. Subsequently, it encourages experimentation in a controlled environment while ensuring consumer protection and market integrity.
Sandbox Beach with white sand and bucket and shovel

Concluding Remarks

The FinTech Regulatory Sandbox offers a controlled environment for innovative financial solutions to be tested and refined, with the aim of enhancing legal certainty within the financial services market. Through this Sandbox, participants have the opportunity to work closely with the MFSA to assess the regulatory implications of their solutions, identify any gaps, and address any issues before going to market.

This not only promotes innovation, but it also ensures that the solutions meet the necessary regulatory requirements and offer true value to consumers and the wider financial services sector. The testing period also allows for the identification and mitigation of any risks, ensuring consumer protection, market integrity and financial soundness. Overall, the Sandbox offers a valuable opportunity for innovative solutions to be developed, refined and eventually launched in a controlled and regulated environment.

How Can We Help?

At MK Fintech Partners, we have extensive knowledge and experience in the field of blockchain, fintech, and financial services. We understand the benefits and challenges of participating in the MFSA Fintech Regulatory Sandbox. So, we can definitely help clients navigate the application process. Our team can work with clients to assess their eligibility for the Sandbox and provide guidance on meeting the eligibility criteria. We can also assist clients in preparing their proposals, ensuring they meet the regulatory requirements and are well-suited for the Sandbox. Our expertise in the industry and understanding of the regulatory landscape makes us well-positioned to assist clients in developing innovative solutions and successfully participating in the Sandbox.

Feel free to get in touch with to discuss your idea!

Key Contact

Av. Matteo Alessandro


More about MK Fintech Partners Ltd.

Michael Kyprianou Fintech Partners Ltd. is a Maltese company providing services in the FinTech sector. It comprises a team of dedicated experts who provide services such as Legal Advisory, Crypto Licensing, Token Issuers’ Licensing, Investment Services Licensing, and registrations of activities related to Fintech, Crypto, Blockchain & Data Protection, Investment Funds Services & Banking, Company Incorporations, and M&As.

MK Fintech Partners forms part of the Michael Kyprianou Group, a top tier international legal and advisory firm. It has established an enviable reputation as a broad-based legal practice over the years. Mainly by keeping at heart its principle to always exceed its clients’ expectations. MK has grown to become one of the largest law firms in Cyprus with offices in Nicosia, Limassol and Paphos. The MK Group’s international presence also includes fully-fledged offices in Greece (Athens and Thessaloniki), Malta (Birkirkara), Ukraine (Kiev), the United Arab Emirates (Dubai), United Kingdom (London), Israel (Tel Aviv), and Germany (Frankfurt).

The content of this article is valid as at the date of its first publication. It intendeds to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided. For further information, contact us at MK Fintech Partners via email at or by telephone +356 2016 1010.

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