A typical example is the limitations in the close connectionand coordination between subjects state management agencies, financial institutions, Fintech startups, technology development
The process of establishing fintech regulatory sandbox in Vietnam
Regulatory bodies and their rỌ€S . ô+ sÊ+sÊ++se+seesssss 33 2.2.2 Curent regulations governing fin(ech - -‹-+-ôs++<s+se+ess 34 2.2.3 Building regulatory sandbox for fintech in Vietnam
Vietnam's fintech market is regulated by various government agencies, with the State Bank of Vietnam (SBV) leading the research and proposal of regulations The SBV collaborates with ministries such as the Ministry of Finance and the Ministry of Science and Technology to create fintech-related regulatory documents Additionally, the Ministry of Public Security (MPS) plays a crucial role in the regulation of the fintech sector.
33 industry When the SBV regulates finance-related matters, the MPS oversees data privacy and cybersecurity-related matters (Dang et al., 2021).
Vietnamese laws lack a comprehensive framework for regulating fintech activities, with existing legal regulations dispersed across various documents and not consolidated into specific legislation While these
Vietnam actively promotes creative and innovative startup initiatives, as evidenced by Decision No 844/QD-TTg issued on May 18, 2016, by the Prime Minister, which endorses the project aimed at supporting the national innovation startup ecosystem.
In 2025, the project outlines essential subjects and activities aimed at bolstering startups through funding, investment attraction networks, human resource training, and improved facilities Directive No 16/CT-TTg, issued by the Prime Minister on May 4, 2017, emphasizes that fostering the national innovation startup ecosystem is crucial for enhancing access to the opportunities presented by the Industrial Revolution 4.0.
Decree No 101/2012/ND-CP regulates non-cash payment activities, covering aspects such as the opening and use of payment accounts, non-cash payment services, and payment intermediary services, along with the organization and management of payment systems Subsequently, Decree No 80/2016/ND-CP introduced amendments primarily focused on enhancing the use of payment accounts and payment intermediary services.
In 2016, the Prime Minister of Vietnam approved a scheme to enhance non-cash payments from 2016 to 2020 (Decision No 2545/QD-TTg), aiming to significantly improve the non-cash payment landscape, reduce cash transactions, ensure the security and effectiveness of payment systems, and strengthen regulatory oversight Following the completion of this initiative, the Prime Minister endorsed a new scheme for the development of non-cash payments for the period 2021 to 2025 (Decision No 1813/QD-TTg).
By 2018, the Prime Minister approved the scheme for intensifying payment for public
The implementation of Decision No 241/QD-TTg aims to enhance access to banking services and non-cash payment options by offering 34 essential services, including tax payments, electricity, water, tuition fees, hospital charges, and social security programs through banks.
In 2019, in response to technological advancements and global economic integration, the State Bank of Vietnam (SBV) consulted on a draft decree to replace the existing decree on non-cash payments A major point of contention was the proposed 49% foreign investor capital contribution limit, which was initially intended to apply only to payment intermediary activities, rather than all fintech companies Ultimately, the SBV chose not to include this limit in the draft submitted to the Government Additionally, related regulations such as Circular No 23/2014/TT-NHNN and the amended Circular No 16/2020/TT-NHNN, which guide the use of payment accounts, along with the Prime Minister's Decision No 316/QD-TTg from March 9, 2021, approving the pilot use of telecommunications accounts for small-value transactions, were also highlighted.
Cryptocurrency is not legally recognized in Vietnam, as stated in official dispatch No 5747/NHNN-PC from the State Bank of Vietnam, which clarifies that virtual currencies, including Bitcoin and Litecoin, do not qualify as legal payment instruments The issuance and use of such virtual currencies are prohibited, with penalties outlined in decree 96/2014/ND-CP and the Penal Code 2015 The Vietnamese government is actively researching and piloting frameworks to establish legal regulations for cryptocurrencies, with the Ministry of Finance's decision No 2146/QD-BTC facilitating collaboration with the Ministry of Justice and the State Bank of Vietnam to create a legal basis for virtual currency management This initiative aims to align with international practices and address issues like tax evasion and money laundering Additionally, exploring the use of blockchain technology for virtual currencies is part of Vietnam's E-Government Development Strategy for 2021-2025, with a vision extending to 2030.
Despite significant advancements in recent years, many areas of fintech in Vietnam, particularly peer-to-peer (P2P) lending, still lack a comprehensive legal framework The government, along with the State Bank of Vietnam (SBV) and other organizations, is actively collaborating to develop and pilot a suitable legal framework for fintech, focusing on establishing a controlled testing mechanism Further details on this initiative will be discussed in the following section.
2.2.3 Building regulatory sandbox for fintech in Vietnam
In response to the challenges in advancing the fintech ecosystem, the Government issued resolution No 100/NQ-CP (2021) to approve a proposal for a regulatory sandbox aimed at fintech activities within the banking sector The State Bank of Vietnam (SBV) developed the decree in alignment with the Party and Government's policies that emphasize innovation and the adoption of 4.0 technology and startup business models The decree's primary focus is to encourage innovative solutions while ensuring risk management, consumer protection, and the stability of the financial system.
In 2022, the State Bank of Vietnam (SBV) sought public feedback on the second draft decree for a controlled testing mechanism for fintech activities within the banking sector The SBV serves as the primary agency for receiving registration applications to participate in this Experimental Mechanism and collaborates with relevant ministries to evaluate these applications The SBV is also responsible for issuing and revoking Test Participation Certificates The sandbox includes six fintech sectors: (1) technology platform-based credit granting, (2) credit scoring, (3) API integration, (4) P2P lending, (5) blockchain technology and distributed ledger technology (DLT) in banking, and (6) the application of other technologies in banking operations to foster innovative business cooperation models aligned with the sandbox's objectives.
Credit institutions and fintech companies involved in Vietnam's sandbox are legally established entities operating within the country The fintech solutions they propose must demonstrate feasibility and have undergone evaluation for their effectiveness and innovation, with a particular emphasis on promoting financial universalization.
The draft decree outlines that 36 requirements must be met for unregulated areas, with a maximum testing period of two years from the participation certificate issuance, subject to adjustment by the SBV based on actual circumstances It categorizes participants into two groups: P2P lending solutions and other fintech solutions A key distinction lies in the registration documentation; businesses offering P2P lending must provide more comprehensive documents, including detailed risk management plans, customer rights protection measures, and regulations regarding IT systems, internal controls, and personnel records.
The draft decree outlines regulations for reporting by participating businesses, establishes protocols for decisions following the testing period, and defines the responsibilities of involved parties Since April 2022, the draft has been open for comments and is now being submitted to the government for review.
INTERNATIONAL PRACTICE IN REGULATORY SANDBOX
HONGKONG oo .eesssssscssscsssssssscsssscesscssccssscsscesssccesscsscessscesscesssessecesssesssessscessees 49 1 Fintech market in Hongkong ees eeeeeseeeeeesececeeeeeeeeseeeeeeeeeeens 49 2 Overview fintech-related sandbox models in Hongkong
Hong Kong has emerged as a vibrant center for fintech innovation, housing 393 startups as per the 2022 Fintech Startup Map by Fintech News Hong Kong The blockchain and cryptocurrency sector leads this landscape, constituting 24% of the total startups, followed by payments at 16%, with regtech and wealthtech also gaining traction The report highlights Hong Kong's commitment to advancing its fintech initiatives, particularly in regtech and the development of central bank digital currency (CBDC) Notably, by June 2021, the eight virtual banks in the region collectively attracted 840,000 customers and amassed deposits totaling HK$21 billion (approximately US$2.6 billion), as reported by the South China Morning Post.
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Figure 3-2: Hong Kong Fintech startups map 2022
The Hong Kong Monetary Authority (HKMA), along with the Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Insurance Authority (IA), is working to foster a conducive environment for fintech growth in Hong Kong Presently, the market features three regulatory sandboxes tailored for banking, investment, and insurance services Furthermore, the HKMA has introduced its Fintech 2025 strategy, which aims to develop next-generation financial technologies.
Hong Kong is positioning itself as a leader in RegTech and fintech innovation, with the HKMA taking significant steps to enhance the sector In 2022, the HKMA hosted a key RegTech event, outlining four initiatives to boost RegTech in banking: introducing the RegTech Adoption Index, launching a centralized knowledge hub for RegTech resources, organizing startup competitions, and developing a RegTech skills framework to upskill banking professionals In August 2023, the HKMA released a new Fintech Promotion Roadmap that emphasizes Wealthtech, Insurtech, and Greentech, alongside technologies like Artificial Intelligence and Distributed Ledger Technology This roadmap aims to go beyond mere awareness, actively supporting financial institutions in implementing fintech solutions.
3.3.2 Overview fintech-related sandbox models in Hongkong
In Hong Kong, three regulators oversee fintech-related sandboxes: the Hong Kong Monetary Authority (HKMA), the Hong Kong Securities and Futures Commission (SFC), and the Hong Kong Insurance Authority (IA) Banks authorized by the HKMA can apply for the HKMA's sandbox, while firms licensed by the SFC and startups seeking SFC licensing can join the SFC's sandbox Additionally, insurers authorized by the IA can apply under the IA's insurtech sandbox, which also features a fast track for online-only insurance companies.
3.3.2.1 The Fintech Supervisory Sandbox (HKMA)
The Fintech Supervisory Sandbox (FSS), launched by the Hong Kong Monetary Authority (HKMA) in September 2016, facilitates the testing of fintech and technology initiatives by authorized institutions (AIs) in Hong Kong During the testing phase, AIs can conduct pilot trials of their fintech services with real banking operations and a select group of customers, without needing to fully comply with HKMA's supervisory standards However, it is important for AIs to ensure that the FSS is not used to circumvent relevant regulations.
50 supervisory requirements In addition, the management of a bank that is allowed to use the FSS should ensure that the following safeguards are in place:
First is boundary meaning clear definitions about the scope and phases (if any) of the pilot trial, the timing, and termination arrangements;
Customer protection measures encompass the careful selection of participants who comprehend the associated risks and willingly engage in the trial This includes effective complaint handling, compensation for any financial losses incurred by customers, and provisions that allow customers to withdraw from the trial if needed.
Effective risk management involves implementing controls to mitigate potential risks stemming from incomplete compliance with supervisory requirements, as well as addressing risks associated with the testing process.
Fourth is about the readiness of the systems and processes involved in the trial and close monitoring of the trial.
While ALS participating in the sandbox are not required to fully comply with the HKMA's supervisory requirements, the HKMA has not specified a comprehensive list of these potentially relaxed requirements within the FSS environment The HKMA will engage with ALS individually to determine the appropriate supervisory flexibility available in the FSS, and will continuously refine this arrangement based on implementation experiences and industry developments Since its initial launch in 2016, the HKMA has introduced FSS 2.0, FSS 3.0, and FSS 3.1.
The Supervisory Sandbox 2.0, introduced in 2017, features significant enhancements over its predecessor, including a Fintech Supervisory Chatroom that offers early supervisory feedback to AI and technology firms, streamlining the development and deployment of new technology applications Additionally, firms wishing to pilot cross-sector fintech products can now apply through a single entry point managed by the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC), and the Insurance Authority (IA) Importantly, the sandbox also welcomes Regtech projects and ideas from banks and technology firms, fostering the growth of the Regtech ecosystem.
Then by the end of 2021, HKMA upgraded FSS 2.0 to ESS 3.0 that facilitates eligible trial projects of research and development to apply funding supports under
ITC’s PSTS° for Technology Companies (PSTS-TC) or PSTS for Incubatees &
Eligible local technology firms in Hong Kong can collaborate with banks to participate in the Graduate Tenants of Science & Technology Parks Corporation and Hong Kong Cyberport Management Company Limited (PSTS-SPC) program These firms must demonstrate the potential of their testing projects to support the public objectives of the Hong Kong Monetary Authority (HKMA) and meet the eligibility criteria of the ITC’s PSTS-TC or PSTS-SPC The HKMA is particularly interested in trial projects focused on AML/CFT® regtech applications and other areas aligned with its regulatory and supervisory mandate.
The HKMA, in partnership with the Hong Kong Cyberport Management Company Limited, has introduced the FSS 3.1 Pilot to improve FSS 3.0 This initiative offers funding support for the development stage of top fintech projects that have successfully completed Cyberport's Fintech PoC Scheme 2021.
The HKMA aims to enhance the commercialization and adoption of projects aligned with its regulatory framework To qualify for funding under the FSS 3.1 Pilot, applicants must be registered in Hong Kong and actively engaged in substantive Fintech activities Key eligibility criteria include prior participation in the PoC Scheme 2021, successful project completion, and having a Hong Kong bank as a project sponsor Projects must focus on cybersecurity, regtech, and risk management, tackle unique challenges within the banking sector, be governed by a written sponsorship agreement, and show significant commercialization potential Each approved project can receive funding of up to HKD500,000, with a total of five projects eligible for the subsidy.
As of August 2023, a total of 305 fintech projects have been tested within the Financial Services Sector (FSS), with banks partnering with technology firms on 217 trial cases Notably, 50% of these projects focus on Regtech, while mobile applications follow closely behind in the range of tested innovations.
> Public Sector Trial Scheme (PSTC) of Innovation and Technology Fund (ITC) ® Anti-money laundering (AML) and combating the financing of terrorism (CFT)
52 enhancements and API services In particular, there are five successful applicants in the FSS 3.1 Pilot and they generally focus on Regtech and risk management.
Distribution of technologies involved in pilot trials
Application programming interface (API) services (17)
Figure 3-3: Distribution of technonlogies involved in HKMA’s sandbox
In 2017, the Securities and Futures Commission (SFC) launched a Regulatory Sandbox to create a controlled regulatory environment for qualified firms to engage in regulated activities under the Securities and Futures Ordinance (SFO) This initiative is open to both licensed corporations and start-ups aiming to implement fintech solutions in their operations To qualify, firms must utilize innovative technologies and actively conduct regulated activities through fintech Additionally, their operations should enhance the range and quality of products and services available to investors, ultimately benefiting the Hong Kong financial services sector.
To mitigate risks when a qualified firm enters the Sandbox, the SFC may impose specific licensing conditions, such as restricting the types of clients served and capping individual client exposure Additionally, firms might be required to establish suitable compensation schemes for investors and undergo regular supervisory audits by the SFC Throughout the testing phase, these companies will be subject to enhanced monitoring and supervision, with the SFC engaging in more intensive dialogue to ensure compliance and safeguard investor interests.