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North Carolina Law Creates Regulatory Sandbox for Tech Companies

Financial and insurance technology companies can now test out new products and services in a controlled space without worrying about certain regulatory barriers. Lawmakers hope the testing environment spurs innovation.

A recently enacted North Carolina bill will allow financial and insurance technology companies to test their products and services in a regulatory sandbox.

The purpose of the environment is to provide a controlled, safe place for companies to test and develop products and business models without having to worry about certain regulatory barriers.

According to the legislation, which was signed into law in October 2021, companies can utilize the space for a limited time and are under strict guidance from a relevant agency. In this case, the overseeing agency will be a newly formed Innovation Council comprised of 11 members.

Council members include the state’s commissioner of banks, the commissioner of insurance and fire marshal, the secretary of state, the attorney general, two public members appointed by the governor and one public member appointed by the lieutenant governor.

Also on the council are public members from academia appointed by the General Assembly and two public members from the North Carolina entrepreneurial or blockchain community appointed by the General Assembly at the request of the speaker of the House of Representatives.

“It’d be a real change from the structure that’s there from a regulatory standpoint,” bill sponsor Rep. Jason Saine, R-97, said. “If we had something where you could move within the margins, that might encourage new industries to come with things like changing blockchain and everything else.”

For example, one project that has been achieved through a regulatory sandbox is creating digital tokens.

“There was a company out of Arizona that was allowing a digital token for businesses to pay each other via a digital token and to exchange goods and services,” Saine said. “This might make it easier for businesses to do business-to-business transactions. However, at the end of the day, the private sector can decide to take advantage of it or not.”

As for how this effort will specifically impact North Carolina, Saine said, the sky’s the limit.

“It’s not necessarily for us to imagine,” Saine explained. “We don’t know what they’ll innovate or what they’ll come to us with, but having an opportunity to have some sort of check and balance to say we’ll grant you some time and allow you to adjust to this rule or not adjust to this rule and see if it works, is key.”

As for what comes next, the council recently met to start the review process.
Katya Diaz is a staff writer for Government Technology. She has a bachelor’s degree in journalism and a master’s degree in global strategic communications from Florida International University.