Law Council of Australia

Business Law Section

Independent Review of the Enhanced Regulatory Sandbox

Submission Date: 13 February 2026

This submission, concerning the Independent Review of the Enhanced Regulatory Sandbox (ERS) is made by the Financial Services Committee of the Business Law Section of the Law Council of Australia (the Committee).

The Committee welcomes the opportunity to provide feedback on the Treasury consultation paper released in December 2025 and the terms of reference announced on 31 October 2025, and thanks Treasury for the extension of time to respond. The Committee’s responses to the consultation questions are informed by the practical experience of its members, including senior legal practitioners working in financial services regulation, fintech, digital assets and licensing.

The Committee acknowledges the important role that the ERS plays within Australia’s financial innovation ecosystem, and supports the Government’s objective of reviewing the ERS to ensure it remains fit for purpose, particularly in light of the significant financial services reforms currently underway, including the changes made by the Treasury Laws Amendment (Payments System Modernisation) Act 2025 (Cth) and the proposed changes under the Corporations Amendment (Digital Assets Framework) Bill 2025.

Key points

The key matters the Committee wishes to bring to the reviewer’s attention are as follows:

  1. The ERS has experienced limited uptake since its commencement in September 2020, with only 19 entities accepted from 103 applications. This suggests that there may be design and structural issues that warrant consideration beyond minor refinement.
  2. The absence of a structured pathway from sandbox participation to full licensing under the Australian financial services licence (AFSL) or Australian credit licence (ACL) regime significantly undermines the practical utility of the ERS and should be a priority for reform.
  3. The scope of the ERS should be expanded to accommodate emerging financial products and services, including digital asset platforms, tokenised assets, stablecoins and payment services, to ensure alignment with the Government’s broader financial services reform agenda.
  4. The current eligibility criteria, including the $5 million aggregate exposure limit and the $10,000 individual retail client exposure limit, are too restrictive to attract meaningful participation from a broad range of innovative firms.
  5. The role of the Australian Securities and Investments Commission (ASIC) in administering the ERS should evolve from a passive notification-based model to a more engaged, collaborative supervisory approach, consistent with international best practice.
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Last Updated on 18/02/2026

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