The study evaluated the potential of such a sandbox and how it aligns with the IPC's mandate
The Office of the Information and Privacy Commissioner of Ontario has published a report evaluating the concept of a privacy regulatory sandbox.
The report intended to consolidate emerging literature on regulatory sandboxes and innovation hubs, to comparatively analyze the privacy regulatory sandboxes developed by international privacy regulators, and to list the key elements and considerations in privacy sandbox development.
In the report, the IPC defined regulatory sandboxes as “controlled environments that facilitate the development, testing and validation of innovative products or services for a limited time before market entry, under a regulator’s supervision.” These sandboxes facilitated socially beneficial innovation while maintaining compliance.
While originally created for the financial technology sector, the use of these sandboxes has expanded to privacy and AI. The European Union’s AI Act spotlighted sandboxing as an agile AI regulation tool.
When effectively designed, a privacy sandbox can support privacy-protective AI innovation, bolster a regulator’s expert knowledge of emerging technologies, and contribute to guidance and possible legislative reforms. Nonetheless, privacy sandbox resourcing has been identified as a challenge, along with maintaining interest and understanding and reconciling potential conflicts with a regulator’s enforcement duties.
At present, privacy regulators have not been charged with overseeing Canadian privacy sandboxes, according to the report. However, regulatory sandboxes have been introduced in the UK, Norway, France, Singapore, Colombia, Sweden, Iceland, and Brazil. In certain situations, sandboxes may be exempted from regulatory requirements; however, data protection legislation may block such exemptions. Thus, regulators must exercise their general advisory powers to give participants structured guidance.
The report identified the following critical considerations for effective privacy regulatory sandbox development:
