The risks of leaving the “regulatory sandbox” prematurely

The world has given us different experiences regarding the legal regulation of activities related to technology, or that in some way contemplate the use of technological solutions.

To a greater or lesser extent, all experiences seem to agree that, prior to going through a regulatory process, any activity must go through a period of time within a testing process (what is now known as the “regulatory sandbox”).

The term “sandbox” (or “sandboxing”, taken from the practice of computer protection of programs against possible hackers or viruses) is today closely identified with the fintech ecosystem and, as its name indicates, refers to a sandbox or a safe and controlled test environment. This environment is traditionally used in the world of technology as a space that serves as a testing modality that allows (in this case referring to the strictly regulatory) to understand the activity, modalities and scope, before the legislator begins the task of frame, define and develop the legal framework that will govern said activity.

There is no fixed and immovable rule regarding until the moment in which a technological project must leave the “sandbox” and evolve to a more or less regulated environment. But one aspect in which the comparative experience seems to be peaceful is that it is not advisable to rush regulatory impulses without fully understanding the characteristics of that technological solution.

In recent weeks we have seen the initiative of the National Legislative Power pretending to regulate certain aspects of digital advertising. In this sense, it has been possible to read opinions of those who promote the legislative initiative, arguing that the rights of the public should be ensured as passive subjects of said advertising or as recipients of the actions of specific actors such as the so-called “influencers”, as well as of the tax aspects that may be related to the activity.

This case allows us to ask ourselves if the legislative initiative has not been premature given the existence of regulations that directly or indirectly influence activity today. From the constitutional sphere we find Article No. 42 of the National Constitution or Law No. 24,240 on Consumer Defense (and its reform, Law No. 26,361) that regulate the relationship between the offeror and the consumer.

We are facing two negative “a priori” consequences: the first, a legislative haste to move forward with legislation in the face of a phenomenon that, due to its novelty, deserves to be understood in greater depth, and the second, in this haste, fall into the error of hyperregulation of an activity that, due to its purely technological nature, requires dynamism and fluidity that excessive regulation can hinder.

In this context, both companies that develop technology or that use technological solutions within their production processes, as well as service providers, must be vigilant in order to plan and anticipate eventual external phenomena that may eventually be risky for our clients’ business planning.