The Financial Regulatory Sandbox was first implemented in the UK in 2016, and is adopted by many countries today. This is because it has a great advantage in that it is a way to reconcile both the positive aspects of innovation and the negative aspects of risk.

In Korea, financial regulatory sandbox were introduced through the Special Act on Financial Innovation Support in April 2019 to promote financial innovation while minimizing risks.

Financial regulatory sandbox seems to have a positive impact on the financial industry, including attracting investment from the venture capitals, increasing employment of fintech startups and existing financial institutions, and trying new innovative financial services. Fintech startups are analyzed to have attracted more than twice the amount of investment on average since the selection of financial regulatory sandbox, and employment has also increased, especially for IT personnel. Existing financial institutions are also known to be expanding their employment around IT personnel while using financial regulatory sandbox as part of their digital transformation, although the selection of financial regulatory sandbox is not the only cause. In addition, new financial services, such as the use of new technologies, convergence with heterogeneous industries, and non-face-to-face financial transactions, have emerged since the implementation of financial regulatory sandbox.

Analysts say that financial consumers are also positively evaluating financial regulatory sandbox. Users of innovative financial services appreciate the convenience and user experience of innovative financial services, and positively evaluate financial accessibility and low service prices, such as telecommunications and e-commerce data-based small business financial services.

However, innovative financial services selected as financial regulatory sandbox have not yet grown enough to shake the landscape of financial markets. There may be an impact of Covid-19, but many fintech startups are struggling with launching and scaling up innovative financial services, and face uncertainty over whether the service will continue after the end of the regulatory grace period.

In order for the financial regulatory sandbox to continue to promote innovation in the financial industry and enhance the benefits of financial consumers, it is imperative to pay more attention to FinTech startups after government selects them as financial innovators, reduce burden and improve procedures related to additional conditions, strengthen incentives for collaborations between FinTech startups and incumbents, resolve uncertainty on selection process.

In the meantime, many institutional studies of domestic financial regulatory sandbox have been attempted in relation to the introduction, but little has been done in terms of legal aspects of financial regulatory sandbox.

The UK operates regulatory sandbox within the discretion of financial authorities, but Korea established the 「Special Act on Financial Innovation Support」 to lay the legal basis for financial regulatory sandbox. This is because most of Korea's financial regulations are based on individual laws, and a separate legal basis is needed to designate a regulatory sandbox as an exception.

Our financial regulatory sandbox is either certification waver or temporary permits, but it is close to certification waver. The constitutional basis of the regulatory sandbox is the Article 119 of the 「Constitution」. The constitutional principle is closely related to the principle of equality. When there is no innovation, grants special status violates the principle of equality in relation to existing operators. Among the fundamental rights, it has to do with freedom of occupation. Meanwhile, the 「Framework Act on Administrative Regulations」 provides the legal basis for the special regulatory system in Article 19-3 as a basic law on administrative regulations.

The 「Special Act on Financial Innovation Support」 presents eight elements as criteria for the examination of certification waver. Service areas, innovation of services, consumer benefits, inevitability of regulatory exemptions, eligibility and capability of services, scope and business methods, consumer protection and risk management measures, stability of financial markets and financial order, and achievement of the purpose of financial laws. The most important element of this is innovation, which is also the justification of the exception.

The legal nature of the regulatory sandbox designation is a kind of special permission like charter. The existence of innovation, the increase in consumer benefits, the impact of financial market stability, and the feasibility of the business plan fall under the professional judgment of financial authorities, especially the Innovation Review Committee. Regulatory sandbox designation is invalid, if there is a merger or conversion. However, the effect of the designation may be maintained according to the business operator's application and the Financial Services Commission's permission. On the other hand, if sufficient testing is not done during the special period, the designation period of the special period may be extended.

When designating innovative financial services, the Financial Services Commission may attach conditions necessary for the protection of financial consumers and the stability of the financial market and financial market order. The type of the condition may be issued in various forms, such as conditions for deadline, burden, and reservation of the right to withdraw.

Of course, administrative procedures are also applied to the designation of innovative financial services under the 「Administrative Procedures Act」. Services that apply for innovative financial services are often fused with other industries as well as finance. Therefore, to designate an exception for the service, it must obtain consent from other jurisdictions. Designation of innovative financial services shall be subject to cancellation under certain conditions, such as failure to comply with the obligations accompanying the designation or violation of the enforcement regulations.

There is an Innovative Financial Review Committee as an examination body for the designation of innovative financial services. The Innovation Finance Review Committee reviews whether the services applied meet the permission criteria. In addition, the Financial Services Commission receives a decision as an advice by the Innovation Review Committee and makes a final designation in consideration of financial market conditions. If the Financial Services Commission designates an application that has not been reviewed by the Innovation Review Committee as an innovative financial service, it is a designation measure with significant defects, which is a reason for its invalidity.

Consumer protection is also an important factor in the designation of innovative financial services. The 「Special Act on Financial Innovation Support」 proposes consumer protection measures such as control of the amount of transactions, risk notices, dispute settlement, liability insurance, and personal information protection. The expansion of the insurance and fund system may be considered in preparation for the lack of self-sufficiency of liability for damages. On the other hand, the 「Special Act on Financial Innovation Support」 in relation to civil claims shifts the burden of proof by requiring operators to prove that they are not intentional or culpable, which is an important element of financial consumer protection.

Alternative dispute resolution(ADR) procedures are also in place to resolve disputes quickly between innovative financial services providers and consumers. On the other hand, if an application for the designation of an innovative financial business operator is rejected, it may be argued through a lawsuit for cancellation of the rejection. There is also a possibility of competitive litigation between businesses regarding exclusive operating rights.

In principle, this is subject to an information disclosure claim, but it is limited to the disclosure of information as it is likely to significantly harm the interests of corporations, etc. if disclosed in the 「Information Disclosure Act」.

Preface
Executive Summary

Chapter 1 Introduction
　References

Chapter 2 Analysis of the Impact of Financial Regulatory Sandbox on the Financial Industry and Consumers
　Section 1 Background of the Discussion
　Section 2 Current Status of Financial Regulatory Sandbox
　Section 3 International Cases of Financial Regulatory Sandbox
　Section 4 Impact of Domestic Financial Regulatory Sandbox on the Financial Industry and Consumers
　Section 5 Improvement Tasks for the Financial Regulatory Sandbox
　References

Chapter 3 Legal Review of the Financial Regulatory Sandbox
　Section 1 Meaning of the Regulatory Sandbox and Necessity of Legal Discussion
　Section 2 Legal Basis of Regulatory Sandbox
　Section 3 Issues Related to Financial Regulatory Sandbox Under Administrative Law
　Section 4 Organizational Review of the Innovation Finance Review Committee
　Section 5 Financial Regulatory Sandbox and Consumer Protection
　Section 6 Remedies and Rights Protection
　Section 7 Future Discussion Points
　Section 8 Conclusion
　References

ABSTRACT