What Is a ‘Sandbox’ Environment in the Context of Financial Regulation and DLT?

A regulatory sandbox is a framework set up by a financial regulator that allows FinTech firms, including those using DLT, to test innovative products, services, and business models in a live but controlled environment. This allows the firm to operate with temporary, relaxed regulatory requirements.

It helps regulators understand new technologies and adapt rules while providing firms a safe space to test derivatives platforms without full compliance burden initially.