Myanmar has seen the benefits of last mover advantage in the e-commerce and payments spaces in recent years. While the appetite exists for Myanmar to emerge as South East Asia's innovation leader; issues such as legacy rules and fragmented regulatory structures hinder it.
One solution discussed is the adoption of a Fintech Regulatory Sandbox to give atmosphere to innovative start-ups threading the legal limit.
A FinTech Sandbox (API) is an environment that innovators and testers can use to mimic the characteristics exhibited by the production environment on a real-time basis to help simulate responses from all the systems an application interface with.
This enables banks and FinTech players to experiment with innovative financial products or services within a well-defined space and duration. Moreover, the presence of appropriate safeguards helps in containing the consequences of failure. Essentially, the sandbox allows for the pilot testing of newly developed technologies.
A sandbox acts as a layer between banks and their innovation initiatives and facilitates smooth collaboration between FinTech companies and incumbents. Additionally, banks are relieved of the stress of dealing with multiple data requests (often the first step to solution development) as the sandbox serves as a ready reservoir of process-related information.
In Myanmar, a regulatory Sandbox would allow a payments company to experiment with cross-border remittance services while exempt from prosecution under section 42 of Foreign Exchange Management Law
Global hubs have benefited greatly from this model. One success story in South Korea's Financial Services Commission(FSC), which has operated has regulatory sandbox since April 2019. The FSC sandbox attracted some $111million in investments for start-ups and expanded the country's blockchain technologies and fintech market.
By adopting such model, Myanmar could increase its tax revenue from applications generated in the regulatory sandbox, and eventually from the corporate tax paid by successful businesses that graduate from the sandbox
The regulatory sandbox could boost the confidence of domestic tech start-ups and foreign investors in doing business in Myanmar.
Also, by nurturing the development of cryptocurrency and blockchain technology, Myanmar could go a long toward remedying its stigma as a country where around 70 percent of the people have no bank account.
Myanmar does not allow outlaw cryptocurrencies as form of payment, the CBM has been a vocal opponent. In 2019, the CBM announced that it did not recognize cryptocurrencies as a mean of commercial payment, leaving them in a sort of grey area under Myanmar law.
As Sandbox could allow companies and start-ups to test the novel payment methods in a controlled environment, thereby educating regulators on how fintech products work and helping government to better regulate them.
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