Regulatory sandbox as a frontier for innovation and sustainability: a systematic review

The continuous influx of new financial innovations powered by disruptive technologies is an urgent call for regulators worldwide to catch up with the market. In response to the call, various regulators established regulatory sandboxes to facilitate innovation and inform the development of new regulatory frameworks. Nevertheless, nine years after establishing the first financial regulatory sandbox, there is no consensus in the literature over the ultimate benefit of establishing a regulatory sandbox. The study conducted a systematic literature review to examine the role and challenges of a regulatory sandbox and propose development guidelines for the effective implementation of a regulatory sandbox. A systematic literature review was conducted through a PRISMA framework with 40 articles from the Clarivate Web of Science and Scopus databases from 2020 to 2024. Thematic and descriptive analysis was conducted to analyse the data. The study established that a regulatory sandbox fosters financial innovation, facilitates effective regulations for innovations, and creates a collaborative learning environment for regulators and innovators. However, regulatory sandboxes are effective in countries with significant Fintech activities and should work hand in hand with other innovation facilitators like the innovation hubs. The literature advocates for improvements in the law governing regulatory sandboxes.