OUR Securities and Exchange Commission (SEC) is now open to developing the financial technology (fintech) industry and adopting the latest innovations in this industry in the Philippines. In April this year, the SEC, through its newly established PhiliFintech Innovation Office (PIO), issued one of its pioneering regulatory issuances: Memorandum Circular (MC) 9, Series of 2024, establishing a regulatory sandbox framework for financial products and services. This regulatory sandbox framework allows companies to test their innovative financial products or services in a live-controlled setting with flexible regulations under the supervision of the SEC. Briefly, interested companies can engage in a pilot testing program of their innovations with less stringent regulatory measures prior to offering their products or services to the public. It should be recalled that in 2021, the SEC established the PIO under its Corporate Governance and Finance Department ('CGFD') to regulate the development and use of fintech. The PIO is especially mandated to create informed policies for fintech innovators and analyze their business models based on their calculated impacts and risks in the financial market. The SEC established the PIO months after it joined the Global Financial Innovation Network, a network of over 60 organizations supporting the areas of financial innovation, inclusion, competition and stability, on Feb. 23, 2021.

According to the SEC, fintech refers to 'a software, a service, or a business that provides technologically advanced ways to make financial processes and transactions more efficient compared to traditional methods.' This broad definition covers automated online payments, instant fund transfers, and trading of cryptocurrencies, among others. As set out in MC 9, the financial product or service within the sandbox must include new technology, use existing technology in a novel way, address a problem, or bring benefits to consumers or the financial markets.