The Qatar Central Bank (QCB) is planning to launch its regulatory sandbox this year, which offers a safe and controlled space for entities to test out their fintech solutions under relaxed regulatory requirements.
Fintechs can spend up to 12 months in this environment operating under a limited licence, with restrictions on parameters including the number of customers or application users, number of daily transactions, maximum value per transaction, value at risk and value of funds held by the entity, said the recently released report of the Qatar Financial Centre Authority and Refinitiv.
The QCB has taken on a role of the “orchestrator” of Qatar’s fintech strategy, in addition to acting as the central regulatory authority of its fintech ecosystem, the QFC-Refinitiv report said.
In alignment with the second strategic plan for the financial sector, the QCB has set itself four key objectives as part of the national fintech strategy, which included creating a connected and collaborative fintech ecosystem, maintaining global competitiveness of fintech services, having a strengthened financial system and providing meaningful solutions to local consumers.
Through fulfilling these targeted objectives, the central bank launched three initiatives related to regulating the fintech sector in Qatar, aiming to maintain a balance between enabling fintech innovation while also protecting consumers and the integrity of Qatar’s financial system.
In exceptional cases, Qatar Fintech Hub (QFTH) may graduate promising fintechs directly into QCB’s regulatory sandbox without going through the incubator and accelerator programmes.
The QFC perceives that around 80% of fintechs do not require regulation, given that they develop the underlying technologies such APIs (application programming interfaces), AI (artificial intelligence) and blockchain, and provide them directly to financial institutions which themselves act as depository institutions.
Nevertheless, fintechs that receive and handle client funds are considered regulated companies and will have to start off in QCB’s regulatory sandbox with a limited licence.
Early in 2020, QFTH was launched by Qatar Development Bank (QDB), mandated with supporting development and growth of the fintech industry led by the QCB.
In the first editions of its incubator and accelerator programmes, QFTH received over 750 applications from new and established fintechs from 73 countries including Qatar, the US, the UK, Australia, India, Singapore, Turkey, Nigeria, Germany, Russia, and Indonesia.
A total of 24 fintechs were selected to participate in both programmes – 11 for the incubator and 13 for the accelerator.
Both programmes are supported by a $100mn VC fund-of-funds managed by QDB, in collaboration with eight local and international funds, including Iris Next Capital, SpeedInvest Fund, Romulus Fund, ERA Fund Accelerator and Alchemist Accelerator. FinTechs in Qatar can also seek VC funding from QFC-based Doha Tech Angels (DTA) – Qatar’s first private angel fund.
The fund specialises in seed funding for early-stage technology start-ups, particularly fintechs, in Qatar and the rest of the world.
The QCB has also embarked on regulating aspects of the fintech business and ecosystem. In 2019, it began with issuing regulations on payments, the fastest growing segment in the region and a priority focus of the National Fintech Strategy.
"The QCB is currently developing information security controls that will be applicable to all fintech segments," the QFC-Refinitiv report said.