By Anont Tanaset, Policy Specialist, Office of National Higher Education Science Research and Innovation Policy Council (NXPO)
Overview of Regulatory Sandboxes in ThailandThailand emerged as one of the first ASEAN nations to embrace sandbox frameworks as a regulatory tool. In December 2016, approximately a year after the United Kingdom’s Financial Conduct Authority (FCA) introduced its regulatory sandbox, the Bank of Thailand (BOT) unveiled its own FinTech Sandbox guidelines, signaling the nation’s foray into this innovative regulatory approach. Among the pioneering technologies tried within this sandbox were QR code payments, biometric verification, blockchains, and distributed ledgers. Notably, in the realm of QR code payments, BOT collaborated with eight major banks to establish and test the ‘Thai QR Code Payment Standard,’ which subsequently became the national standard adopted by all Thai banks. This initiative yielded significant impacts, as evidenced by a report from the Thailand FinTech Association indicating a five-fold increase in digital payments in Thailand from 2017 to 2021, with an average of 312 transactions per person per year and over seven million QR code payment points established nationwide.
Following BOT’s lead, the Securities and Exchange Commission (SEC) and the Office of Insurance Commission (OIC) swiftly established their own sandboxes in mid-2017, namely the Securities Trading Center Regulatory Sandbox and the Insurance Regulatory Sandbox, respectively. These first-generation sandboxes were notably sector-focused, a logical approach considering the dynamic and high-impact nature of the finance and investment sectors. They also embodied an adaptive sandbox model, signifying the regulators’ willingness to amend existing regulations based on the successes demonstrated within the sandbox environment.
In subsequent years, an increasing number of regulators expressed interest in establishing their own sandboxes, primarily focusing on specific key technologies. Notable examples include the National Broadcasting and Telecommunications Commission (NBTC), which set up a sandbox to test 5G technologies in designated areas, and the Civil Aviation Authority of Thailand, which launched an unmanned aerial vehicle (UAV) testing sandbox. Furthermore, regulators are exploring the creation of more sector-based sandboxes, such as FoodTech Sandbox and HealthTech Sandbox, to address industry-specific technologies and innovations like functional food, alternative protein, and telemedicine. Additionally, the Ministry of Higher Education, Science, Research, and Innovation has established a multi-sectoral or central sandbox known as the “Innovation Sandbox,” aimed at supporting novel technologies or business models involving multiple regulatory domains. Pilot projects for this sandbox were considered, such as autonomous vehicles or robot delivery, involving several regulators responsible for road usage, radio frequency, consumer protection, insurance, and personal data protection. However, navigating this multi-regulator landscape poses challenges due to varying levels of readiness among regulatory bodies and the complexities associated with inter-agency coordination. Bureaucratic systems and lengthy decision-making processes, coupled with regulators’ lack of necessary infrastructure, resources, or expertise, are also factors that hinder the effectiveness of multi-sectoral sandboxes.
Moving forward, several key insights and recommendations have emerged.
Empowering Potential Regulators to Establish Their Own SandboxesIt is crucial to ensure that every regulator comprehends the possibility and importance of establishing their own sandbox, contingent upon market demand. Occasionally, regulators hesitate to do so due to existing laws that do not grant them the requisite authority or concerns about potential repercussions. Addressing this challenge requires a top-down approach, with the prime minister or cabinet declaring a policy that actively encourages regulatory sandbox initiatives.
However, it is essential to note that not all regulators are obligated to establish sandboxes, given the associated costs in terms of time and personnel. There are instances where a sandbox may not be necessary if the technology in question and its impact are extensively studied, or if there are established regulations or solutions in other countries that can be safely adopted. Additionally, interested regulators should learn from their counterparts who have already established sandboxes, or engage in capacity-building programs to equip themselves with the necessary skills and expertise for successful implementation.
Ensuring Fair Treatment Between ParticipantsGiven that sandboxes typically operate on a small scale with a limited number of participants who stand to benefit from advantages such as accelerated time to market, transparency and fairness in the selection criteria and process are crucial. Ideally, each sandbox should be accessible to all qualified participants regardless of their size or background. Small and medium enterprises, as well as startups, could be prioritised or even provided with subsidies to ensure a level playing field compared to larger corporations.
However, participation in a sandbox does not automatically confer advantages. Participants undergo thorough monitoring during sandbox trials, facing heightened regulatory scrutiny, while non-participating companies operate without such oversight. This disparity could potentially result in an unfair competitive landscape. To address this, it is imperative to ensure fair and equitable regulatory enforcement for all companies, both within and outside of the sandbox, thereby promoting a level playing field and fostering a conducive environment for innovation and growth.
Clearly Communicating the Goals and Expectations of SandboxesEffectively communicating sandbox goals and expectations is crucial for regulators to foster understanding and collaboration among potential participants. They must clearly articulate the scope, timeline, and potential outcomes of the sandbox to minimize misunderstandings. It should be emphasised that sandboxes are not intended as a means to bypass necessary laws or procedures, especially when international or industry standards are involved. Rather, they should be utilised to explore novel technologies or business models where current standards may not apply. Additionally, potential sandbox participants should be informed about any associated costs and resources they may need to invest during the sandbox process to ensure transparency and informed decision-making.
In summary, Thailand’s advancement in leveraging sandboxes to bolster innovation and technology integration across diverse sectors marks a significant milestone. However, to maximise the benefits of this approach, policymakers and regulators must confront lingering challenges and refine their methodologies. This entails gaining deeper insights into sandbox mechanics across various industries while upholding principles of fairness and efficacy in regulatory oversight. As Thailand adapts to the dynamic landscape of emerging technologies, the effective implementation of sandboxes will play a pivotal role in driving sustainable growth and competitiveness in the digital age.
The views and recommendations expressed in this article are solely of the author/s and do not necessarily reflect the views and position of the Tech for Good Institute.
About the writer:
Anont Tanaset is a Policy Specialist at the Office of National Higher Education Science Research and Innovation Policy Council (NXPO). His expertise lies in the development of innovation ecosystems and the formulation of innovation and technology laws and regulations, notably the Thai Bayh-Dole Act. Additionally, his previous experience includes developing policies to promote startup and entrepreneurship ecosystems in Thailand.
