IFSCA Revises FinTech Sandbox Framework for IFSCs

Circular eF.No.: 505/IFSCA-FTec0FTEF/1/2023, Dated: 16.03.2026

The International Financial Services Centres Authority (IFSCA) has issued a revised FinTech Sandbox Framework, replacing the earlier 2022 framework, to promote innovation and experimentation within the IFSC ecosystem.

The updated framework provides a structured environment for testing innovative financial products, services, and business models under regulatory supervision.

1. Types of Sandboxes Introduced

The revised framework expands the scope of sandbox models to support diverse innovation pathways across financial sectors:

• Regulatory Sandbox – For testing FinTech solutions with regulatory relaxations
• Innovation Sandbox – For testing ideas using live or simulated data without full regulatory exposure
• Inter-operable Sandbox – To enable cross-sector testing and integration of financial services
• Overseas Sandbox – To facilitate cross-border testing and collaboration with foreign jurisdictions

This multi-layered sandbox approach is designed to support innovation at different stages of development.

2. Eligibility and Application Process

The framework lays down detailed criteria for eligibility of applicants, including FinTech firms, startups, financial institutions, and other eligible entities.

Applicants are required to:

• Submit proposals outlining the innovative nature and use-case of the solution
• Demonstrate consumer benefit and market relevance
• Establish readiness for testing within the sandbox environment

The application process includes evaluation by IFSCA based on defined parameters.

3. Evaluation and Testing Conditions

The framework prescribes clear evaluation and testing conditions, including:

• Defined testing period and scope
• Safeguards for consumer protection and risk management
• Limits on the scale and exposure during testing
• Continuous monitoring and reporting requirements

These conditions ensure controlled experimentation without compromising systemic stability.

4. Limited Use Authorisation (LUA)

A key feature of the framework is the provision for Limited Use Authorisation (LUA), which allows entities to:

• Operate their FinTech solutions within a restricted and controlled environment
• Test products with real users under regulatory oversight

LUA enables practical validation of solutions before full-scale deployment.

5. Regulatory Relaxations

The framework allows select regulatory relaxations during the sandbox testing phase, subject to conditions. These relaxations are intended to:

• Encourage experimentation and innovation
• Reduce compliance barriers during testing
• Enable faster development and validation of FinTech solutions

6. Reporting and Compliance Requirements

Participants in the sandbox must comply with ongoing reporting requirements, including:

• Periodic progress reports
• Incident and risk reporting
• Final evaluation and outcome reporting

These requirements ensure transparency and enable IFSCA to assess the effectiveness of the sandbox.

7. Objective of the Revised Framework

The revised FinTech Sandbox Framework aims to:

• Foster innovation in financial services within IFSCs
• Provide a safe and controlled testing environment
• Enable collaboration across sectors and jurisdictions
• Support development of scalable and globally competitive FinTech solutions

Overall, the framework strengthens IFSCA’s role in positioning IFSCs as hubs for FinTech innovation and regulatory experimentation.

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