Arizona Opens Applications for First Fintech Sandbox
Arizona’s legislature developed a bill (Bill 2434) allowing financial technology startups to experiment, without having to deal with regulatory burdens. After passage of the bill, the Arizona Attorney General is accepting applications from Fintech companies, blockchain companies, mortgage companies, and more. Arizona Attorney General, Mark Brnovich stated, “Today is the first day” and “It is live.” The venture has been termed a Finntech Sandbox.
Hopefully, this type of venture will not be the only one around the country. A report by the U.S. Treasury Department suggests that this is the case.
Companies selected to participate in the Fintech Sandbox may notice relaxed state regulations. However, they will still be required to adhere to federal regulations, no matter how stringent. In terms of experimentation, the project allows startups with fewer than 10,000 customers to experiment with fewer state requirements and there is an initial two-year limit and there will be an optional one-year extension for qualified companies as well.
Brnovich further mentioned that aside from federal regulations, the startups will still be required to comply with Arizona’s usury laws as well. For instance, they will be required to submit a business plan, technology testing plan, an estimated time to market, and they’ll also be required to keep record books.
As Brnovich stated, “To me, this actually provides more consumer protection.”
Other states have also implemented their own strategies to attract investment in financial innovation, but Arizona is ahead of the game in the sense that it is accepting applications for a regulatory sandbox.
Brnovich added, “We want to get some of that capital going in and out of Arizona. . . . At the end of the day increased investing turns into increased employment.”
The venture is not without concerns though. For instance, some are concerned that the sandbox designed to reduce the time and money necessary to go to the market might lead to increased vulnerability. “It’s done in a way that won’t jeopardize competitive advantage.”
This is not the only high-tech venture in Arizona. For instance, there are several other cryptocurrency and blockchain startups.
Finally, Brnovich mentioned “Arizona has always rugged Western individuals, people not afraid to be themselves, a ‘live and let live' perspective. It’s an entrepreneur’s spirit that drove people here.”