What is a Regulatory Sandbox?

Regulatory Sandboxes for Artificial Intelligence: Techno-Legal Approaches for India, ISAIL-TR-002

1 Prologue

What is a Regulatory Sandbox?

A regulatory sandbox is an initiative by a domestic sectoral regulator, backed by a domestic legal or a policy instrument, which aims at permitting innovator companies to conduct live testing of their products that harness the power of novel technologies.1 Such live testing is done after the sectoral regulator, who has proposed the sandbox, implements the necessary safeguards, limitations and operational criteria as per the objectives of the regulatory sandbox,2 which will be discussed in detail in further portions of this technical report. So far, regulatory sandboxes have promoted the entry of new innovators, encouraged existing innovators to test newer technologies, reduced barriers in the development and testing of new technologies, protected innovators who are a part of an implemented sandbox against potential disputes which may arise out of damage caused to consumers during the live testing process, helped innovators in mitigating risks in the technology being used and has helped regulators in planning, formulating and implementing regulatory tools for ensure better regulation of the new technology being tested.3

1 K.J. Shashidhar, ‘Regulatory Sandboxes: Decoding India’s Attempt to Regulate FinTech Disruption’ (Observer Research Foundation Issue Brief, 20 May 2020) <https://www.orfonline.org/research/regulatorysandboxes-decoding-indias-attempt-to-regulate-fintech-disruption66427/> accessed 19 February 2022. 2 Ibid. 3 Sharmista Appaya and Mahjabeen Haji, ‘Four Years and Counting: What We’ve Learned From Regulatory Sandboxes’ (World Bank Blogs, 18 November 2020) <https://blogs.worldbank.org/psd/four-years-

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