The Ministry of Finance has recently published a Memorandum of Law, introducing a potential new program designated to enable fintech companies to test their products and services in the Israeli market by creating a “regulatory sandbox” that will offer fast-growing Israeli financial technology startups a better environment to operate in.
The Memorandum is open for public comment until July 19th, 2020.
The Israeli financial sector is regulated by several government entities that have created an intricate web of regulatory requirements. The complexity of traditional regulation comes at a price, with fintech companies burdened by requirements that impose high costs and often discourage innovation.
The Memorandum calls for the establishment of a “regulatory sandbox”, which will be led by a committee comprised of officials from the Bank of Israel, the Capital Markets Savings and Insurance Authority, the Israel Securities Authority and the Anti-Money Laundering Authority.
The committee will select fintech companies eligible to take part in the program, which will run for two years and may be further extended, based among other things on their level of innovation, expected benefit to consumers in Israel, risks involved in the activities of the company and impact on competition in the financial system in Israel. There will be a licensing track designed for fintech companies that need a license to operate in Israel, and a guidance track for other companies.
Click here for the memorandum (Hebrew).