The world’s first blockchain-based digital regulatory sandbox has reached the finish line

The Bank of Lithuania has completed the research phase of its LBChain project, during which it has created a unique sandbox combining technological and regulatory infrastructures as well as assessed its potential.

“It means that LBChain will let providers to start their products from scratch and use the system to develop them into a market-ready solution. Moreover, it will reduce the time for product development and will offer lower regulatory and technology risk”, states Kęstutis Kvainauskas, attorney-at-law of ECOVIS ProventusLaw, a law firm specialising in financial law and financial services licensing. According to the Bank of Lithuania, the platform may also be applied in such fields as energy or healthcare.

Usually FinTech startups have unique and innovative ideas, however, they lack general knowledge and experience when it comes to the financial ecosystem and legal regulation. They also generally do not have the opportunity to test their products in a safe and innovation-conducive environment.

The platform is aimed at serving the key needs of fintechs and start-ups, and provides them with the possibility to gain new knowledge, carry out blockchain-oriented research, test and adapt blockchain-based services as well as offer advanced innovations to their clients. LBChain offers both: consultations by the Bank of Lithuania on regulation as well as technical and technological assistance by leading blockchain integrators.

One of the most important features of this blockchain-based platform is its inclusiveness. The LBChain project is divided into three stages. After the first design stage, the Bank of Lithuania has selected three service providers: Deloitte (IE), IBM (PL) and Tieto (LT). During the second development stage, the three service providers were working on two tasks. In its development stages, LBChain was used by 11 fintechs from 8 countries that tested more than 10 different financial products and services, including a KYC solution for AML compliance, a cross-border payment solution, smart contract for factoring process management, payment tokens, a mobile POS and payment card solution, a crowdfunding platform as well as an unlisted share trading platform. Most of the testing was carried out remotely. Based on Hyperledger Fabric and Corda, the platform was developed by IBM Polska Sp. z.o.o and TietoEVRY.  The third phase was dedicated to its final testing and development.

The next step of the project will be to move to the production environment, i.e. to make the solution available to consumers.

LBChain is the world’s first-of-its kind platform developed by a financial market regulator (the Bank of Lithuania). The Bank of Lithuania has already been recognised as one of the most progressive regulators in the EU. By streamlining licensing and automating a number of supervision procedures, it has transformed Lithuania into a jurisdiction that prioritizes progress and helps Fintech newcomers to enter the market transparently and smoothly. It is also creating the right environment for innovation, where new Fintech products can be developed and then scaled globally. Thanks to these changes, Lithuania is now a leader in continental Europe for the number of licensed EMI entities and emerged as one of the front runners in the field of blockchain technology application.

The article was prepared in accordance to the information published by the Bank of Lithuania.

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