Research Report
Study on Regulatory Improvement followed by Regulatory Sandbox
Ⅰ. Backgrounds and Purposes
○ Regulatory sandbox refers to a mechanism to lift regulations for newly developed products or service under limited conditions. The main purpose of regulatory sandbox is to provide testing grounds for new business models and innovations that are not protected by current regulation, nor supervised by regulatory institutions.
- Specifically, the regulatory sandbox provides new business models with ‘experimental grounds for innovations’. It helps them enter into market or test commercial possibilities under certain conditions, for example, time, place, or scale.
○ Compared to the United Kingdom where the regulatory sandbox centers on the financial sector, Korea introduced it covering numerous sectors. The regulatory sandbox is used in various forms such as fast prove, special cases for demonstration, or temporary permission.
○ Success or failure of a regulatory sandbox would be determined by follow-up legislation. Therefore, it is needed to improve or amend related legislations rather than implement it for individual cases.
○ Considering importances and issues related to a regulatory sandbox, the study was conducted to examine effectiveness of regulatory sandboxes in the areas of land transport and food sanitation, and to effectively discover subsequent regulatory reform tasks.
- Based on findings, this study identified the existing legal system related to the subsequent regulatory reformin the fields of land transport and food sanitation. In addition, through expert surveys, it proposes a direction of legislation for concrete legislative improvement on regulatory sandboxes in the future.
Ⅱ. Major Content
▶ Current numbers of granting regulatory sendboxes and legal issues (land transport/ food sanitation)
○ As of December 31, 2019, the total number of 138 regulatory sandboxes were passed. Among them, the study reviewed backgrounds to grand them for certain sectors in the land and transportation field and the food sanitation field and their expected effects. Then, the study analyzed related laws and legal issues on granted regulatory sandboxes as well as their major contents.
▶ Analyzing amendments of follow-up legislations on regulatory sandboxes
○ Analyzing 5 regulatory sandbox projects
- For the five projects, follow-up legislation was carried out mainly in the area of administrative legislation. The study found that not much concern had raised over safety or social disruption due to the constant permission of the regulatory sandbox while many positive factors that could form new innovative services or markets had already been confirmed.
○ As a result of reviewing issues for each project, it was confirmed that it might be important to comprehensively review interests, side effects of other aspects of deregulation, and the effectiveness of alternatives in follow-up legislative amendments.
▶ Examining characteristics of each project
○ Expert surveys were conducted according to evaluation factors to determine the regulatory characteristics of the regulatory sandbox and the maturity, actual benefits, and conflict of subsequent legislation.
○ With the survey on experts, it was found that experts took positive stance on innovation and timeliness while taking conservative stance on safety issues.
- It was confirmed that amendments of laws and regulations were smoothly carried out when issues related to securing safety or damage to order raised in each project were discussed and predicted in detail. To this end, measures to secure citizens' safety or alleviate concerns about safety should be discussed more actively and transparently.
▶ Categorization of cases from the perspective of regulation reorganization
○ The implementation process of the regulatory sandbox project was reviewed and the possible changes to the regulation were analyzed. According to findings of the study, when the follow-up regulatory amendments are carried out after confirming possibilities of changing the existing regulations, the value of regulatory sandbox would also increase.
○ This study reviewed implemented regulatory sandbox projects from the follow-up regulatory amendment perspective. In particular, this study identified 3 tasks to be dealt with for success of the regulatory sandbox projects considering appropriateness and facilitation of amending regulations.
- task that should be carried out in parallel with the regulatory sandbox and prompt follow-up legislation,
- task in which subsequent regulatory amendment is possible when safety is verified for a relatively short period, and
- task in which follow-up regulatory amendment might be carried out after long-term safety verification.
○ This classification is intended to provide a reference criterion for setting priorities for legislation amendments. In addition to the sandbox categorization, this study suggests the direction of the follow-up legislation to deal with legal issues that triggered the implementation of the regulatory sandbox for each project.
Ⅲ. Expected Effects
○ This study is the first to carried out substantial examination of regulatory sandbox projected implemented in Korea rather than focusing on the mechanism of regulatory sandbox itself. Based on findings of the study, the regulatory sandbox might be a useful mechanism for regulations and innovations.