Technology is evolving and advancing at a breakneck pace across the world. Emerging technologies are reinventing everything from how we interact with each other to how we interact with businesses and institutions. Given the upward trajectory of technology, it looks like the “innovation” industry is ripe for the opportunity – an opportunity that looks set to take off in North Carolina.
In 2021 alone, North Carolina has been the target of high-profile tech announcements, including Google’s plans to open a cloud engineering center in Durham and Apple’s new campus at Research Triangle Park. These exciting developments are now coupled with a recent proposed legislation that would create a ‘regulatory sandbox’ further pushing for technological economic development to expand access for North Carolina citizens to unique products and services or business models that are not currently widely available.
A regulatory sandbox allows companies and entrepreneurs to test emerging technologies, products, services or business models at the forefront (or even outside) of an established regulatory framework. Sandboxes have popped up across the country – from Arizona in 2018 to Kentucky, Nevada, Utah, Vermont and Wyoming in 2019 to Florida and West Virginia in 2020 – to stimulate economic growth and remove often encountered barriers to market access. by creative business models and startups. North Carolina is one of the most recent states to study the potential economic benefits of becoming a hub of innovation. Although North Carolina has tried and failed to implement a sandbox in 2019, the 2021 iteration seems more likely to be successful given the growing number of peer states that have since adopted, or are currently working on, comparable legislation creating a sandbox.
North Carolina’s Regulatory Sandbox Act of 2021 (the “NC Sandbox Act”) aims to establish a more flexible regulatory environment for the financial services and insurance industries within the state. Here’s what you need to know about the NC Sandbox Act bill, currently pending before the Trade Committee:
Purpose and Applicability
The NC Sandbox Act would allow an applicant to temporarily test an innovative financial product or service, making that product or service available to consumers on a limited basis without subjecting the applicant company to certain licenses or other regulatory obligations imposed by Canadian law. the applicable state.
The NC Sandbox Act would apply to entities regulated by the Office of Commissioner of Banks or the Department of Insurance and offering a product or service that falls within the definition of an “innovative product or service”, that is say that the entities use a new or emerging technology, or provide products, services, business models or delivery mechanisms that are currently not widely available to the public.
North Carolina Innovation Council established
To govern the program, the NC Sandbox Act proposes to create an “Innovation Council”, which would be responsible for supporting innovation, investment and job creation in North Carolina by encouraging participation in the bac. regulatory sand. The 11-person council would set standards, principles, guidelines and policy priorities for the types of innovations the regulatory sandbox program would support. Interestingly, the first analyzes of the bill expressly mention the authorization of the Innovation Council to focus on blockchain initiatives (here is a legislative analysis of SB470). The Innovation Council would also be responsible for approving admission to the regulatory sandbox program.
Innovation exemption requests
For $ 50, an innovator can apply for admission to the regulatory sandbox program. In determining whether to admit a candidate, the Innovation Council will consider:
- The nature of the innovation product or service proposed to be made available to consumers, including the potential risk to consumers;
- The methods that will be used to protect consumers and resolve complaints during the sandbox period;
- The entity’s business plan, including the availability of capital;
- Whether the management of the entity has the necessary expertise to lead a pilot of the innovative product or service during the sandbox period;
- If a person substantially involved in the development, operation or management of the innovative product or service has been convicted of or is currently under investigation for fraud or violations of state or federal securities; and
- Any other factor that the Innovation Council or the competent public body deems relevant.
By instructing the Innovation Council to take consumer protection in addition to economic growth into account when evaluating candidate entities, proponents of the legislation are apparently trying to avoid some of the criticism that surrounded the proposal. 2019 sandbox.
Applicants must also have a physical presence in North Carolina. A waiver of the specified requirements imposed by law or rule may be granted as part of entry into the program and would be valid for the duration of regulatory sandbox participation, but generally should not exceed 24 months.
The proposed legislation also further addresses sandbox program requirements, consumer protection, registration requirements, privacy, and other initiatives and obligations. As mentioned above, the legislation is currently pending before the committee, and Bradley is closely monitoring this legislation and will ensure continued coverage of the proposed bill in the weeks and months to come. If passed, the law could come into force on October 1, 2021.