In an effort to promote the development of new financial technology (fintech) products, Mick Mulvaney, Acting Director of the Consumer Financial Protection Bureau (CFPB), announced last week the creation of the Office of Innovation. Mulvaney said the new division, to be run by Paul Watkins under the umbrella of the CFPB, is designed to foster an “environment where companies can advance new products and services without being unduly restricted by red tape that belongs in the 20th century.” A CFPB press release stated that the new office will focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and reviewing outdated or unnecessary regulations.

Watkins is notable for helping Arizona establish a similar state-level “regulatory sandbox” for cryptocurrencies and blockchain technology. Arizona’s FinTech Regulatory Sandbox, the first state fintech sandbox in the country, allows companies limited access to the Arizona marketplace in exchange for relaxed regulations. Other states, including Illinois, are currently exploring developing their own fintech sandboxes.

The CFPB’s sandbox is designed to take a similar approach and provide relief from certain regulatory requirements, creating a space where fintech firms will be free to toy with newer fintech products involving cryptocurrencies, other blockchain applications, microlending (lending by individuals rather than institutions) and mobile payments. In creating the Office of Innovation, the CFPB is working closely with the Commodities Futures Trading Commission, which last year established its own regulatory sandbox called “LabCFTC.”

While Arizona was the first state to institute a fintech “sandbox,” other countries, including the UK, Singapore, Australia, and United Arab Emirates, had already established their own “sandboxes” by the time Arizona joined the “sandbox” movement.