An empirical approach to the Rule of Law: the case of Regulatory Sandboxes

di Nadia Maccabiani

SOMMARIO: 1. Premise – 2. A few words about blockchain and distributed ledger technologies in the financial sector – 3. General and specific challenges of legal and political concern – 4. Innovation facilitators in FinTech: the case of Regulatory Sandboxes – 4.1. The Italian Regulatory Sandbox – 5. Governance by experimentalism – 6. An enhanced Rule of law?

Different regulatory techniques have been employed, at different governance levels, when science and technology clash with the law. Likewise, Regulatory Sandboxes are tools provided by the legislator to deal with technology-enabled financial services. As far as this latter aspect is concerned, our main focus shall be on the deployment of blockchain and DLT technologies in FinTech owing to their potential to multiply the hurdles of the legal challenges already raised by the Internet as well as by the financial dematerialisation and globalisation. With regard to these elusive phenomena, Regulatory Sandboxes aim at remedying the shortcomings, abuses or misuses of existing legal rules without, at the same time, creating an obstacle or an excessive burden to innovation. They may in essence be conceived as a nuanced consequence of both, as the European-derived “better regulation” model as well as the underlying proportionality and precautionary principles. The outcome of this process represents a sort of “learning by doing”, to be employed with the peculiarity of a rapidly changing and technology-driven financial activity towards a double-layered purpose of legal relevance: on the one hand, the return under the judicial auspices of the law of otherwise unregulated cases; on the other hand, the mutual harmonisation between the law and the case under the competent Regulatory Authority’s supervision. By holding out the promise of a tailored and more flexible application of the current legal rules, an activity, which was previously carried out under the dominant framework of lex cryptographica and informatica, is lured within legally regulated borders. This represents a procedural process for recovering the original meaning of the Rule of Law, i.e. its effectiveness.