New legislation announced to boost innovation in the financial sector

“This legislation is a game-changer for our industry,” added Koleya Karringten, Executive Director, Canadian Blockchain Consortium.. “This shows that Alberta is leading the way as a destination for blockchain technology and innovation. Bill 13 will streamline the legislative and regulatory process, allowing businesses to bring their ideas and businesses to life.

“Ensuring Alberta’s financial system is modern, competitive and stable is critical to strengthening and growing our economy,” said Kate Hill, Chief Risk and Compliance Officer, Alberta Central.. “Alberta credit unions support the government’s financial services regulatory sandbox and the significant potential it brings for innovation in our province’s financial services sector.

In general, before companies can start offering new products and services to the public, they must devote a significant amount of resources to meeting regulatory requirements, government officials say. When the new product or service finally hits the market, there is always a risk that it might not work as expected or might not be popular enough to continue being supported. The sandbox aims to mitigate this kind of risk and encourage companies to be more innovative.

“A provincial regulatory sandbox, focused on the finance and fintech sector, is a very positive development that will help support innovation, competition and job creation, while ensuring safeguards consumers and appropriate regulatory safeguards,” noted Dr. Ryan Clements, Deputy. Professor, Chair, Business Law and Regulation, University of Calgary.

The supervised environment lowers barriers to entry for new businesses while creating controlled parameters for testing consumer applications that could increase choice and reduce costs of financial products and services. It also facilitates efficiency, coordination and information sharing between regulatory bodies. »

“At Neo Financial, we’re not just looking to improve existing financial infrastructure, we’re looking at what can be built that hasn’t been done before. It’s initiatives like the regulatory sandbox that help attract business and talent to Alberta, and allow us to continue to develop and pave the way for new fintech innovations,” said Andrew Chau, co-founder and CEO of NeoFinancial.

The Government of Alberta is expected to work with participating companies to ensure they take appropriate precautions and provide safe and reliable products and services to consumers in the province.

If the Legislative Assembly passes this bill, the government should begin accepting sandbox applications by July 1. The Government of Alberta should work with participating businesses to ensure appropriate consumer protection measures are in place.

If the Financial Innovation Act pass, each company participating in the sandbox must meet the following criteria:

  • Physical Presence Requirement – ​​Applicants would be required to maintain a physical presence in Alberta. For example, they will need to have an office in Alberta or staff living in Alberta.
  • Financial Services Requirement – ​​The sandbox would only be for businesses that offer financial products or services.
  • Innovation Requirement – ​​Applicants should adequately explain why each eligible product or service should be considered new and original, or at least how it is a new adaptation or material improvement of another. product or service. Applicants would not receive exemptions for products or services that are already offered in Alberta by other companies.
  • Business Plan Requirement – ​​Applicants must provide a strong and viable business plan, including details for testing their financial product or service and plans for getting out of the regulatory sandbox.

Entrants would have up to two years in the sandbox to test their products, with the option to extend the period for an additional year.

Participating companies may be subject to additional terms, conditions and restrictions, which the government will determine on a case-by-case basis. For example, participating companies may be required to:

  • consult a qualified expert or auditor
  • limit the number of customers who can buy the tested product or service
  • have a certain amount of cash or liquid capital to support the business
  • provide proof of appropriate insurance coverage
  • implement specific financial security or bonding requirements to mitigate risk and loss
  • implement risk management policies and procedures
  • maintain a consumer complaint mechanism to allow consumers to resolve their concerns

Government of Alberta Quick Facts

  • Alberta’s regulatory sandbox would apply to the following statutes and related regulations:
    • Loan and Trust Companies Act
    • Credit Unions Act
    • ATB finance law
    • Consumer Protection Act
    • Financial Consumer Law
    • Privacy Act
  • Examples of technologies tested include software tokens, biometric authentication, application programming interface (API) services, distributed ledger technologies, and mobile app enhancements.
    • A software token is a security resource often used for authentication. A common software token is a personal identification number.
    • An API is a software intermediary that allows two applications to communicate with each other.
    • A distributed ledger is a database shared and synchronized across multiple sites, institutions, or geographies. They allow multiple parties to view, update and/or authenticate financial transactions.
  • Alberta is committed to supporting the province’s growing financial services sector.
    • From 2000 to 2020, Alberta’s real gross domestic product (GDP) in the financial services sector grew at an average annual rate of more than 4%, outpacing the growth of all other provinces and contributing more than 14 billion to provincial GDP in 2020.
    • Nearly 63,000 Albertans worked in the financial services sector in 2019.

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