The Securities and Futures Commission (SFC) of Hong Kong has launched a regulatory sandbox to allow companies perform regulatory activities using fintech.

In order to be eligible for the SFC Regulatory Sandbox, firms should be licensed corporations or startups intending to conduct regulated activities.

The eligibility criteria also require firms to be fit and proper, use innovative technologies, offer products and services of high quality for investors, deploy adequate investor protection measures, and display a serious commitment to conduct regulated activities through fintech so as to benefit the Hong Kong financial services industry.

To ensure minimal risk to the investors, eligible firms will be imposed licensing conditions that may include limiting the types of clients served by the firm or the maximum client exposure.

The regulator will closely supervise firms entering the sandbox and collaborate with them to help them identify risks and refine their business models.

SFC CEO Ashley Alder said: “The SFC recognizes that firms utilizing innovative technologies may broaden investor choice and benefit the Hong Kong financial services industry.

“For the sake of market integrity and better investor protection, the sandbox provides a confined regulatory environment for qualified firms to demonstrate the reliability of their Fintech solutions as well as their internal control systems at the initial stage.”