CySEC Regulatory Sandbox

The CySEC Regulatory Sandbox, established by the Cyprus Securities and Exchange Commission (CySEC), provides a supervised environment for businesses to test innovative financial technologies, products, services, and business models. The initiative supports technological advancement while maintaining investor protection, regulatory compliance, and market integrity. The program offers eligible firms an opportunity to evaluate their innovations under CySEC's guidance before broader market deployment.

Overview & Objectives

• The CySEC Regulatory Sandbox builds on CySEC's Innovation Hub to support responsible technological innovation within Cyprus's financial services sector.
• It provides a structured, time-limited framework for testing innovative financial technology (FinTech), regulatory technology (RegTech), and supervisory technology (SupTech) solutions.
• The initiative promotes collaboration between CySEC and businesses developing technology-driven products or services within its supervisory remit.
• It aims to improve regulatory understanding of emerging technologies and support the adaptation of financial regulations to evolving market developments.
• The program is open to eligible regulated and unregulated firms, provided their proposed solutions meet the applicable eligibility and regulatory requirements.

Why Join

• Controlled testing: Test innovative products, services, or business models on a limited scale under CySEC's supervision.
• Regulatory guidance: Receive tailored guidance and constructive feedback on how existing financial regulations apply to your solution.
• Direct collaboration: Work with a dedicated CySEC officer throughout the preparation and testing process.
• Regulatory clarity: Identify compliance requirements, potential risks, and necessary safeguards before wider market deployment.
• Innovation support: Contribute to CySEC's understanding of emerging financial technologies while developing solutions that benefit the financial services industry.

Eligibility Criteria

The CySEC Regulatory Sandbox welcomes regulated and eligible unregulated businesses developing technology-based innovations related to financial services within CySEC's supervisory jurisdiction.

Unregulated businesses may qualify through one of the following arrangements, subject to applicable legal requirements:

• Obtaining the necessary CySEC authorisation before undertaking regulated activities.
• Testing solutions exclusively within their corporate group or operating under another applicable regulatory exemption.
• Conducting demonstrations or testing using demo environments that do not involve regulated financial services requiring authorisation.
• Establishing a collaboration agreement with a CySEC-regulated entity.

Proposed innovations must also:

• Relate directly or indirectly to activities within CySEC's supervisory remit.
• Demonstrate genuine innovation in their product, service, technology, or business model.
• Be sufficiently developed and ready for testing in an operational environment.
• Offer identifiable benefits or improvements to financial services and market participants.

Important: Participation does not exempt businesses from applicable financial regulations or licensing requirements. Firms must maintain the necessary authorisations and comply with relevant supervisory obligations throughout the program.

Application Phase

• Interested businesses must complete the official Regulatory Sandbox application form available through the CySEC website.
• Completed applications and required supporting documents must be emailed.
• CySEC evaluates submissions against the program's eligibility criteria and assesses whether the proposed innovation is suitable for supervised testing.
• Applicants are normally notified of the assessment outcome by email within 6–8 weeks after CySEC receives a duly completed application.
• Applications are accepted on a rolling basis throughout the year, without a fixed deadline.
• There is no application fee, although CySEC may limit the number of participating firms or concurrent tests.

Preparation Phase

• Successful applicants enter a preparation phase, generally lasting approximately 1–2 months.
• Participants work with CySEC to establish testing objectives, performance indicators, risk safeguards, and operational requirements.
• The agreed testing arrangements are documented in a formal testing agreement that governs participation.
• CySEC assigns a dedicated officer to guide each participant and coordinate regulatory communication.
• Both parties establish a reporting and communication plan before testing begins.

Testing Phase

• Participants conduct small-scale testing of their proposed solutions in their own testing environments, using their own resources and agreed data.
• The testing period typically lasts up to six months, subject to the agreed testing arrangements.
• CySEC monitors testing activities and provides regulatory guidance throughout the process.
• Participants must submit periodic progress reports and demonstrate compliance with the agreed testing parameters and applicable regulations.
• Testing extensions of up to six additional months may be considered on a case-by-case basis. Requests must be submitted at least one month before the original testing period expires.

Evaluation/Exit Phase

• Following the testing period, participants must prepare a comprehensive self-assessment report evaluating the outcomes of their testing activities.
• The exit report should assess whether the agreed objectives, milestones, and key performance indicators were achieved.
• Participants must submit their exit reports to CySEC within 30 days after completing the testing period.
• CySEC evaluates the testing outcomes and may provide non-binding feedback on the participant's findings.
• Findings may also help CySEC identify areas where regulatory clarification or adjustments could support financial innovation.

Frequently Asked Questions

CySEC published an official Regulatory Sandbox FAQ document on 12 July 2024, addressing participation requirements, eligibility, application procedures, testing arrangements, regulatory obligations, and program timelines.

The CySEC Regulatory Sandbox offers FinTech, RegTech, and other eligible financial technology businesses a structured opportunity to test innovative solutions while receiving regulatory guidance. Firms with sufficiently developed technologies that fall within CySEC's supervisory scope can use the program to assess compliance requirements and refine their solutions before broader implementation.