As the UK House of Lords Financial Services Regulation Committee kickoff the first evidence session of their inquiry into Regulatory Sandboxes this week (with written submissions closing Friday) in this, the first of a short series, in which we will map, diagnose, and work out how it might be possible to treat and revive the Innovation Unit, we will first pose some pertinent questions.
From 2014, the United Kingdom became a wonder of the regulatory world – where fintech was happening! The Financial Conduct Authority (FCA) became the regulator other regulators flew in to learn from.
Monzo. Revolut. Starling. Wise. Built here. Copied everywhere. $11.6bn invested in 2021.
Then…
The first half of 2026: £1.8bn. The lowest since 2016. Same country. Same regulator. Same sandbox. Something broke.
The Whisper
Now: Talk to founders, and you hear the same line: Sandboxes are where innovations go to die.
You will not hear it said to a regulator. Not by anyone who needs a license. Not in public. Not on the record.
Some firms have sat in a sandbox for two years or more. No exit. No verdict. Just waiting. Is that a sandbox – or a cage?
The Blame
The easy answer: Blame the sandbox.
Fix the process. Speed up the cohorts. Publish better metrics. But what if… The sandbox was never the engine, but a tool bolted onto one.
An engine’s harder to see – a small unit inside the FCA, built to think differently while working with the regulator around it. And protected so it could. Sandboxes are easy to copy. Announce one, count the applicants, publish the case studies.
A culture inside a culture is not. It doesn’t fit a press release, as a sandbox announcement does. So over time the tool took the limelight, and the thing it was built to sit inside was forgotten. Then… quietly absorbed?
Why now?
Three reasons this matters now, not later.
The House of Lords is asking. The Noakes inquiry into regulatory sandboxes is the first serious public look in a decade. AI is the second wave. Tokenization, stablecoins, new financial plumbing. One more chance for the UK to lead, or to watch again as others do.
The model went global. GFIN, created by the FCA and chaired by the FCA for seven consecutive years, now links 70-plus regulators.
So whatever went wrong is being exported.
Map. Diagnose. Treat.
Map – what happened, when, and in what order? What was the context? Where did it come from?
Diagnose – did the sandbox just obscure or did it erase its foundations, the Innovation Unit on which it was built – and what that cost?
Treat – what would a fix look like? Including for GFIN.
Does the engine that catapulted the UK forwards still exist – and if so, can it be restarted?
Barry James is a Board Member & Strategic Advisor for The Global Equity Crowdfunding Alliance (GECA). He is a co-Founder & Advisory Board Member, University of East London Centre for Fintech, 2022–2024, and co-Founder, The Transition Foundation’s Institute for the Study and Encouragement of Ethical Good Governance.
