Regulatory sandboxes (closed)

Innovation continues to challenge traditional regulatory frameworks. For innovators, these challenges can prevent new products and services from being developed and getting to market. For the regulators (government organizations) that must ensure that new products and services do not compromise protections for Canadians, it can be difficult to know how to best respond and adapt to innovation.

Regulators may be unsure about how to regulate a new product or service. They may also lack the data needed to understand how a new regulatory approach would work, or how to effectively resolve a regulatory barrier that is stopping an innovation from getting to market. In these cases, regulatory sandboxes can help regulators to respond.

What is a regulatory sandbox?

Also known as a regulatory pilot, regulatory test bed, or an innovation space, a regulatory sandbox is a way for regulators to test a regulatory approach in a controlled space, collect evidence on how the approach works in practice, and then use that evidence to make any permanent regulatory changes or decisions – all while continuing to uphold protections for health, safety, and the environment.

When are regulatory sandboxes valuable?

Sandboxes allow regulators to better understand an innovation or a new approach and identify real-world impacts. Within a controlled environment, regulators can actively monitor the approach and put in place conditions to make sure that consumer protections are upheld throughout the test. If any unexpected risks come up or the situation changes, regulators can change the conditions or end the sandbox as needed.

By learning from these sandboxes, regulators can determine how they should design and manage regulations and create frameworks that are more effective and well-suited to innovation.

  • Developing informed and evidence-based regulatory approaches for new products and services: Testing a new product or service allows regulators to understand the real-world impacts of the innovation and how the innovation responds to different regulatory approaches. This allows regulators to determine how the innovation can be better included into a regulatory framework, while maintaining a controlled environment where the regulator has the authority and oversight needed to continue protecting the health, safety, and well-being of Canadians.
  • Getting innovation to market more quickly: Regulatory requirements and approval processes may prevent or challenge bringing a new product or service to market. A sandbox provides a framework for regulators to bring the product or service to market safely, while investigating how they can adapt regulatory requirements to the product or adapt the product to the regulatory requirements.

How can sandboxes modernize Canada’s regulatory system?

A sandbox may not be possible under an existing regulatory regime. For example, regulators may want to test a regulatory approach for a new technology that is not allowed by the regulations. In these cases, sandbox authorities would allow regulators to issue temporary exemptions from a specific legislative or regulatory requirement for the purpose of enabling the sandbox.

The Gap

While these authorities enable regulators to pilot different approaches, they are currently only available to certain federal regulators under select laws. This means that, across the federal government, there are gaps and inconsistencies in the authorities, criteria, and processes for sandboxes. This can lead to unfair market advantages for companies operating in one regulated sector versus another.

The need for transparency

Providing the authority for all ministers to enable sandboxes in their regulatory regime provides consistency and clarity, compared to the current framework where only certain ministers have this authority, and the other regulators must first individually change their laws to include this authority. However, this proposal would mean each minister could issue temporary exemptions from specific requirements if they determine that it is necessary to enable a sandbox in the public interest. As such, it will be essential for regulators to be transparent about their decision-making and outcomes when using this authority, so that stakeholders, the public, and the broader system can hold individual regulators accountable.

Any permanent regulatory changes resulting from sandboxes would still be subject to the normal requirements under the Cabinet Directive on Regulation, which includes publishing proposals publicly in Canada Gazette, as well as review and approval by Treasury Board, a Cabinet Committee.

Example case study #1

Transport Canada (TC) is running a regulatory sandbox to test whether Light Sport Aircraft can be used in a pilot training environment. This practice is not compatible with current regulations. As a result, TC must provide flexibility to identified flight schools to enable a sandbox by using their sandbox authorities under their legislation.

In partnership with select flight training schools approved to use Light Sport Aircraft, TC will assess aircraft reliability, and impact on emissions and noise complaints in a flight training environment. TC will also maintain oversight to ensure that the use of Light Sport Aircraft does not compromise safety or other regulatory protections. TC will then use the data they gather from the sandbox to inform how they design and implement any permanent regulatory change.

Example case study #2

Advanced therapeutic products (ATPs) are drugs or devices, or any combination of drugs and devices, that current health regulations were not designed to handle because they are so complex or distinct.

In June 2019, Health Canada (HC) created a new framework to authorize ATPs with custom requirements. This can allow for earlier access to promising therapies, while setting requirements that support HC oversight to manage risks and uphold high standards for patient safety and product efficacy. Under this framework, once Health Canada gathers enough experience with how they need to regulate the ATPs, they can amend existing regulations or develop new regulations for the ATP.

The first two products to be developed as ATPs are adaptive machine learning-enabled medical devices and fecal microbiota therapy. More information on this pathway for ATPs is available online.

Share your thoughts

We are seeking your feedback on this legislative authority using the tools found below.

For assistance

Visit the Let’s Talk Federal Regulations 101 page to learn how:

  • to use the platform
  • to register and provide comments
  • your feedback will be reported back

For technical assistance, visit the Technical Support page.

Innovation continues to challenge traditional regulatory frameworks. For innovators, these challenges can prevent new products and services from being developed and getting to market. For the regulators (government organizations) that must ensure that new products and services do not compromise protections for Canadians, it can be difficult to know how to best respond and adapt to innovation.

Regulators may be unsure about how to regulate a new product or service. They may also lack the data needed to understand how a new regulatory approach would work, or how to effectively resolve a regulatory barrier that is stopping an innovation from getting to market. In these cases, regulatory sandboxes can help regulators to respond.

What is a regulatory sandbox?

Also known as a regulatory pilot, regulatory test bed, or an innovation space, a regulatory sandbox is a way for regulators to test a regulatory approach in a controlled space, collect evidence on how the approach works in practice, and then use that evidence to make any permanent regulatory changes or decisions – all while continuing to uphold protections for health, safety, and the environment.

When are regulatory sandboxes valuable?

Sandboxes allow regulators to better understand an innovation or a new approach and identify real-world impacts. Within a controlled environment, regulators can actively monitor the approach and put in place conditions to make sure that consumer protections are upheld throughout the test. If any unexpected risks come up or the situation changes, regulators can change the conditions or end the sandbox as needed.

By learning from these sandboxes, regulators can determine how they should design and manage regulations and create frameworks that are more effective and well-suited to innovation.

  • Developing informed and evidence-based regulatory approaches for new products and services: Testing a new product or service allows regulators to understand the real-world impacts of the innovation and how the innovation responds to different regulatory approaches. This allows regulators to determine how the innovation can be better included into a regulatory framework, while maintaining a controlled environment where the regulator has the authority and oversight needed to continue protecting the health, safety, and well-being of Canadians.
  • Getting innovation to market more quickly: Regulatory requirements and approval processes may prevent or challenge bringing a new product or service to market. A sandbox provides a framework for regulators to bring the product or service to market safely, while investigating how they can adapt regulatory requirements to the product or adapt the product to the regulatory requirements.

How can sandboxes modernize Canada’s regulatory system?

A sandbox may not be possible under an existing regulatory regime. For example, regulators may want to test a regulatory approach for a new technology that is not allowed by the regulations. In these cases, sandbox authorities would allow regulators to issue temporary exemptions from a specific legislative or regulatory requirement for the purpose of enabling the sandbox.

The Gap

While these authorities enable regulators to pilot different approaches, they are currently only available to certain federal regulators under select laws. This means that, across the federal government, there are gaps and inconsistencies in the authorities, criteria, and processes for sandboxes. This can lead to unfair market advantages for companies operating in one regulated sector versus another.

The need for transparency

Providing the authority for all ministers to enable sandboxes in their regulatory regime provides consistency and clarity, compared to the current framework where only certain ministers have this authority, and the other regulators must first individually change their laws to include this authority. However, this proposal would mean each minister could issue temporary exemptions from specific requirements if they determine that it is necessary to enable a sandbox in the public interest. As such, it will be essential for regulators to be transparent about their decision-making and outcomes when using this authority, so that stakeholders, the public, and the broader system can hold individual regulators accountable.

Any permanent regulatory changes resulting from sandboxes would still be subject to the normal requirements under the Cabinet Directive on Regulation, which includes publishing proposals publicly in Canada Gazette, as well as review and approval by Treasury Board, a Cabinet Committee.

Example case study #1

Transport Canada (TC) is running a regulatory sandbox to test whether Light Sport Aircraft can be used in a pilot training environment. This practice is not compatible with current regulations. As a result, TC must provide flexibility to identified flight schools to enable a sandbox by using their sandbox authorities under their legislation.

In partnership with select flight training schools approved to use Light Sport Aircraft, TC will assess aircraft reliability, and impact on emissions and noise complaints in a flight training environment. TC will also maintain oversight to ensure that the use of Light Sport Aircraft does not compromise safety or other regulatory protections. TC will then use the data they gather from the sandbox to inform how they design and implement any permanent regulatory change.

Example case study #2

Advanced therapeutic products (ATPs) are drugs or devices, or any combination of drugs and devices, that current health regulations were not designed to handle because they are so complex or distinct.

In June 2019, Health Canada (HC) created a new framework to authorize ATPs with custom requirements. This can allow for earlier access to promising therapies, while setting requirements that support HC oversight to manage risks and uphold high standards for patient safety and product efficacy. Under this framework, once Health Canada gathers enough experience with how they need to regulate the ATPs, they can amend existing regulations or develop new regulations for the ATP.

The first two products to be developed as ATPs are adaptive machine learning-enabled medical devices and fecal microbiota therapy. More information on this pathway for ATPs is available online.

Share your thoughts

We are seeking your feedback on this legislative authority using the tools found below.

For assistance

Visit the Let’s Talk Federal Regulations 101 page to learn how:

  • to use the platform
  • to register and provide comments
  • your feedback will be reported back

For technical assistance, visit the Technical Support page.

Discussions: All (1) Open (0)

  • Regulatory sandboxes

    over 1 year ago
    4 Responses
    CLOSED: This discussion has concluded.

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    Setting additional rules and criteria around this authority and regulatory sandboxes will help ensure that regulators are consistent, transparent, and accountable. 

    The following criteria are being considered, for regulators to follow, when issuing exemptions to ensure the sandbox authority is being used responsibly across different sectors:

    • Confirm that the exemption is needed to enable the sandbox; 
    • Confirm that the exemption and sandbox are in the public interest;
    • Obtain ministerial approval;
    • Set a time limit (for example, up to three years), allowing for one renewal (for example, up to an additional three years); 
    • Prescribe any additional conditions that must be met throughout the sandbox, including conditions that allow the regulator to effectively maintain oversight;
    • Publish the exemption and rationale; and,
    • If needed over the course of the sandbox, adjust or withdraw the exemption.


    More broadly, regulators running a regulatory sandbox would have to follow these criteria to ensure they are being transparent with the public throughout its life cycle:

    • Make any plans for regulatory sandboxes public; 
    • Report publicly on outcomes of the sandbox; and, 
    • Have mechanisms for the public to provide feedback before, during, and after each sandbox.


    Regulators would also have to follow these additional criteria to ensure they are being consistent and thorough in the way that they plan and run a regulatory sandbox:  

    • Consider the various potential implications of the sandbox (e.g., domestic, international, sectoral, economic, and environmental impacts) and opportunities to leverage relevant work in other jurisdictions;
    • Identify key stakeholders and coordinate with other implicated regulators;
    • Assess the value and feasibility of the sandbox;
    • Develop plans for collecting and evaluating data, and measuring success;
    • Develop plans for maintaining oversight throughout the sandbox;
    • Develop risk and mitigation strategies, and consider how to adapt plans and processes in a manner consistent with the level of risk; and,
    • Consider the post-sandbox pathway (i.e., how the regulator will end the sandbox and support a transition to any future regulatory change).

    Questions:

    We are seeking your input on any or all of the following questions:

    1. What would you like to see in an ideal process as a stakeholder engaging on a regulatory sandbox?
    2. What criteria or principles should regulators have to follow in using this authority and, more generally, in running regulatory sandboxes? 
    3. Are there any potential issues and/or solutions that you would like regulators to consider?
    Go to discussion
    Replies Closed
Page last updated: 03 May 2024, 11:33 AM