Regulatory sandboxes are programs that enable entrepreneurs to test new products and services in the market while maintaining close rapport with regulators. Sometimes, entrepreneurs’ regulatory obligations are temporarily reduced to provide authorities the chance to understand the technological environment and design and enforce more effective, tailor-made safeguards.

Regulatory sandboxes have proven beneficial across a broad range of sectors undergoing digitalization over the past 15 years, including finance, energy, health, transportation, and legal services. However, their effectiveness—for regulators, entrepreneurs, and society at large—depends on careful design, engineering, and management. For example, undue influence on the selection process, lack of safeguards, or miscalibrated scope could undermine the rule of law or create anti-competitive distortions. Regulatory sandboxes are also resource-intensive, so return on investment must be carefully assessed. That is why TFS has been advocating not only for the implementation of regulatory sandboxes but also for specific design features to improve their likelihood of success.

In February 2020, the European Commission published a White Paper on Artificial Intelligence. In response, TFS published a memo titled “Experimentation, testing & audit as a cornerstone for trust and excellence,” advocating for numerous changes including the addition of regulatory sandboxes, which were not referenced in the white paper.

When the European Commission’s proposed AI Act was unveiled in April 2021,regulatory sandboxes were included as a measure to “reduce the regulatory burden and to support Small and Medium-Sized Enterprises (‘SMEs’) and start-ups.” However, details concerning the rollout plan were left open for discussion. To aid in clarifying these concepts, in August 2021, TFS published a memo titled “Trust in Excellence & Excellence in Trust”, which called for a more ambitious regulatory sandbox system, among other recommendations, such as testing and experimentation facilities, national- to EU-level information flows, and incident reporting, to foster innovative and agile governance.

In February 2022, as the European Commission and the French Presidency of the Council both began to reflect on the design of the sandboxes system, TFS published a memo titled “Sandboxes without the quicksand: making EU AI sandboxing work for regulators, entrepreneurs and society.” Then, in July 2022, our proposal was further institutionalized in a communication of the European Commission, The New European Innovation Agenda.