The biggest problem that companies face when testing and implementing innovative technologies is the need to change the current legislation. The development and testing of new products based on distributed ledger technology requires special conditions that often do not correspond to existing norms.
The solution to this problem would be the introduction of a special “system of organizational protection”. This means creating an ecosystem in which SOEs and companies can test developments without regulatory barriers.
Federal Law No. 258 “On Experimental Legal Systems in the Field of Digital Innovation in Russia” came into force on 28 January. This allows new programs to be tested to ensure that they are effective and useful, and then based on the results to determine whether existing legislation will be changed to accommodate innovation. The creation of a sandbox in a certain limited area – for example, in a city – will allow a certain number of companies to test their innovative digital products.
Beyond DLT, the list includes artificial intelligence, big data, robotics, quantum technology, and more. In this way, companies will be able to comply with existing legislation with a number of exceptions necessary in order for them to test the new program. In the long term, sandboxes will become a catalyst for the creation of new jobs, the emergence of new organizations, and an increase in the competitiveness of Russian companies in the international market.
The implementation of an experimental legal system, or ELR, is possible in the following areas: financial activities, trade, construction, provision of state and municipal services, state control (supervision) and municipal control, medicine, transport, agriculture, industry, etc. Sandkassen’s term of office limited to three years and can be extended for another year by decision of the Russian government. Applications are also accepted from organizations proposing a special legal regime.
Prospects for the Russian sandbox
Experts recognize that establishing regulatory hedge funds will require an agreed roadmap with the regulator, and ELR participants must meet certain requirements. But the new federal law could give business representatives a real opportunity to work on innovations and new developments in the digital sphere under a special legal regime. The authorities, in turn, will assess the results and effectiveness of the experiment, decide to expand the protection fund and the need for changes in legislation.
The residential sector is an area where testing in defensive mode can yield significant benefits. Using DLT will reduce paperwork, simplify payment procedures and make invoices more transparent. Users will be able to interact directly with resource providers and know exactly what services their money was spent on.
According to the Ministry of Economic Development of Russia, eight projects in Russia have already been selected for inclusion in regulatory funds. Among them are the initiatives of Mobile TeleSystems, one of the largest mobile operators in Russia, which include a “smart hotel” without employees, the possibility of biometric identification when signing service contracts without physical presence (by phone), unmanned transport and telemedicine. Or he could use CryptoVeche, a blockchain-based voting system, to conduct public hearings in St. Petersburg remotely. After that, public hearings of local authorities can be transferred online, which will make this process more accessible and transparent for citizens. Other projects included the non-profit Big Data Association, the Tomsk Oblast Administration, and the Russian Foundation for Advanced Research Projects.
ELR is a “test” engine, and the keyword here is “experimental”. Therefore, the projects are not so big, and the deposits are not the largest, but futuristic.