Banking Law and Experimental Financial Systems in Spain

1. Introduction

“Experimental financial systems” in Spain refers mainly to the legal framework that allows new technology-based financial products, services, business models and processes to be tested under controlled regulatory conditions before they are deployed widely in the financial market.

The central instrument is Spain’s Law 7/2020 of 13 November on the Digital Transformation of the Financial System (Ley 7/2020, para la transformación digital del sistema financiero). Its most important innovation is the creation of a regulatory sandbox / controlled testing space (espacio controlado de pruebas).

The Spanish approach attempts to balance two potentially conflicting objectives:

1. Financial innovation — allowing fintech, banking-tech, AI, blockchain and other technologies to develop; and
2. Financial stability and consumer protection — preventing experimental technologies from creating systemic, consumer, AML or data-protection risks.

As of September 2026, Spain's sandbox is operating through successive cohorts; the 12th cohort was opened for applications from 1 September to 13 October 2026.

2. Meaning of an Experimental Financial System

An experimental financial system is not a completely unregulated financial market.

Rather, it is a controlled legal environment in which an innovative financial technology can be tested with:

• limited participants;
• defined testing conditions;
• regulatory supervision;
• risk-mitigation measures;
• informed consent where real users participate;
• safeguards against financial loss;
• data-protection safeguards; and
• mechanisms for ending or expanding the experiment.

Examples include:

• AI-based credit scoring;
• blockchain-based settlement;
• tokenisation of financial assets;
• digital identity systems;
• automated investment advice;
• RegTech;
• SupTech;
• innovative payment systems;
• open-banking applications;
• programmable money;
• insurance technology;
• fraud-detection algorithms;
• digital mortgage processes; and
• innovative AML/KYC systems.

Spanish Law 7/2020 expressly defines technological financial innovation broadly enough to encompass new business models, applications, processes and products affecting financial markets and financial services.

3. Main Legal Framework

The Spanish experimental-finance framework is based on several layers.

The important point is that Law 7/2020 does not abolish ordinary financial regulation. Instead, it provides a controlled mechanism through which innovative projects can be tested while remaining within a legally supervised framework.

4. The Spanish Regulatory Sandbox

The regulatory sandbox is the core experimental financial system in Spain.

The law describes it as a controlled testing environment in which technology-based financial innovations can be tested safely and under regulatory supervision.

Its three defining characteristics are:

A. Controlled environment

The experiment must be sufficiently controlled so that risks to participants and the financial system are reduced or eliminated.

B. Supervisory instrument

The sandbox is not merely a business-development programme. It gives financial supervisors an opportunity to observe new technologies and understand their regulatory consequences.

C. Law + protocol model

The experiment operates through:

Law 7/2020 → supervisory assessment → testing protocol → controlled experiment → conclusions/exit.

5. Authorities Involved

Several institutions can participate depending upon the nature of the project.

5.1 Banco de España

The Banco de España is particularly relevant where the project concerns:

• banking;
• payment services;
• electronic money;
• lending;
• credit;
• monetary/financial activities falling within its supervisory competence.

For sandbox projects under its competence, Banco de España evaluates applications, enters into testing protocols, appoints monitors, supervises testing and examines the final results.

5.2 CNMV

The Comisión Nacional del Mercado de Valores (CNMV) becomes relevant where innovation concerns:

• securities;
• investment services;
• capital markets;
• trading platforms;
• investment products;
• tokenised securities falling within securities regulation.

5.3 DGSFP

The Dirección General de Seguros y Fondos de Pensiones (DGSFP) supervises relevant insurance and pension innovation.

5.4 Other authorities

The sandbox coordination structure can also involve:

• SEPBLAC — AML/CFT;
• Spanish Data Protection Agency (AEPD);
• Treasury;
• other competent public authorities.

6. Eligibility Requirements

A project generally needs to satisfy three important requirements.

Requirement 1 — Technology-based innovation

The proposal must constitute a technology-based innovation applicable to the financial system.

For example:

An AI system that evaluates creditworthiness using alternative financial data.

would potentially qualify.

A conventional banking product with no technological innovation would normally not be sufficient merely because it is financially innovative.

Requirement 2 — Sufficient maturity

The technology must be sufficiently developed to be tested.

A purely theoretical research proposal is therefore different from a functioning prototype capable of controlled testing.

Requirement 3 — Added value

The project should potentially provide value in at least one area, such as:

• improving regulatory compliance;
• benefiting financial-service users;
• increasing efficiency;
• improving markets;
• improving regulation;
• improving financial supervision.

7. Sandbox Procedure

The process can broadly be divided into three stages.

Stage I — Access

The promoter submits an application to the Treasury/competent process.

The supervisory authority evaluates the proposal.

The project can receive a favourable or unfavourable assessment.

Stage II — Testing

If accepted, the promoter and relevant authority establish a testing protocol.

The protocol establishes matters such as:

• scope of the experiment;
• duration;
• participants;
• technological parameters;
• safeguards;
• monitoring;
• reporting;
• termination conditions;
• compensation arrangements.

Where real consumers participate, informed consent and protection mechanisms become particularly important.

Stage III — Exit

Following testing, the results are evaluated.

The authorities may identify:

• regulatory barriers;
• consumer-protection issues;
• technological risks;
• supervisory problems;
• areas requiring legislative reform.

Importantly, participation in the sandbox does not itself grant a banking licence or permission to conduct a regulated financial business commercially.

8. Why This Is Important for Banking Law

Traditional banking regulation was designed primarily around conventional institutions:

Bank → branch → account → loan → payment → securities.

Experimental financial systems create new structures:

Fintech → algorithm → cloud infrastructure → API → digital identity → blockchain → automated decision.

This creates legal questions that traditional legislation may not answer adequately.

For example:

AI lending

Who is responsible if an AI model unfairly rejects loan applications?

Blockchain

Who is legally responsible if an automated smart contract produces an erroneous financial transaction?

Digital identity

How should banks verify a customer without conventional face-to-face procedures?

Tokenisation

When does a digital token become a regulated financial instrument?

Automated advice

Can an algorithm satisfy the investor-protection duties traditionally imposed upon human advisers?

The sandbox provides regulators with an opportunity to understand these questions before technology becomes systemically important.

9. Consumer Protection

Experimental finance does not mean experimental consumer rights.

Spanish regulators specifically consider:

• consumer protection;
• data protection;
• AML/CFT;
• financial stability.

The Banco de España expressly states that sandbox participation must not compromise these public-policy objectives.

This is particularly important because financial technology can create new forms of consumer harm.

For example:

Traditional fraud

→ fraudulent human transaction.

Algorithmic fraud

→ automated manipulation of financial decisions.

Traditional mis-selling

→ employee misrepresents financial product.

Algorithmic mis-selling

→ automated recommendation systematically favours a particular product.

The legal responsibility may therefore extend beyond the immediate technological developer to the regulated financial institution using the system.

10. Data Protection and Experimental Finance

Financial innovation is heavily dependent upon data.

Banks may process:

• identity information;
• transaction histories;
• income information;
• credit information;
• behavioural information;
• biometric information;
• location information.

Consequently, experimental financial systems must interact with the GDPR and Spanish data-protection law.

An experimental project cannot simply argue:

“It is only a test, therefore ordinary data-protection requirements do not apply.”

Instead, the experimental environment requires appropriate safeguards concerning:

• lawful processing;
• purpose limitation;
• data minimisation;
• transparency;
• security;
• retention;
• automated decision-making;
• data-subject rights.

11. AML/CFT and Experimental Finance

Fintech can make financial services faster, but the same technology can be exploited for:

• money laundering;
• terrorist financing;
• identity fraud;
• synthetic identities;
• layering;
• crypto-related financial crime.

Therefore, Spanish experimental finance incorporates AML/CFT considerations.

A technologically sophisticated KYC system may itself become an experimental project.

For example:

A bank proposes using AI + biometric verification + blockchain credentials to onboard customers.

The regulatory question is not merely whether the technology works.

The regulator must also ask:

Can the system reliably identify the customer and prevent illicit finance?

12. Experimental Finance and Financial Stability

The greatest concern is systemic risk.

Suppose an experimental algorithm is used by one small fintech.

The consequences may be limited.

But suppose the same algorithm becomes widely used by:

• 80% of Spanish banks;
• major payment institutions;
• securities firms;
• insurance companies.

A software error could then become a systemic financial event.

Consequently, sandbox regulation is based upon the principle:

Innovation should occur at a controlled scale before it creates uncontrolled systemic exposure.

This is one of the strongest justifications for regulatory sandboxes.

13. Important Spanish and EU Case Law

A major legal point should be understood here:

There is relatively little reported Spanish case law directly interpreting Law 7/2020's sandbox itself, because it is a relatively recent regulatory mechanism. Therefore, the most useful case law comes from Spanish and EU banking disputes involving the principles that experimental finance must respect: transparency, investor protection, regulatory supervision, resolution, information duties and consumer protection.

Case 1 — STS 1916/2013 — Cláusulas Suelo

Supreme Court of Spain, 9 May 2013

This is one of Spain's most important banking-consumer cases.

The Supreme Court examined mortgage “floor clauses” (cláusulas suelo).

The Court held that a clause could be formally understandable yet still fail the special transparency requirement applicable to consumer banking contracts.

Banks had to ensure that consumers understood the real economic consequences of the clause.

Relevance to experimental finance

The principle is highly relevant to:

• AI-generated loan agreements;
• automated investment products;
• robo-advice;
• algorithmic pricing.

A technologically sophisticated interface cannot replace substantive consumer transparency.

Legal principle:

Technological sophistication does not eliminate the bank's duty of transparency.

14. Case 2 — Spanish Supreme Court, 8 September 2014 — Caja Segovia

The Supreme Court subsequently invalidated several mortgage floor clauses involving Caja Segovia because the bank failed to satisfy the required transparency obligations.

The Court rejected the argument that merely having a notarially executed document or making the contract available for reading was enough to discharge the bank's explanatory duty.

Relevance

This becomes particularly important for digital banking.

Suppose a customer clicks:

“I agree.”

That click alone cannot necessarily establish meaningful understanding of a complex algorithmically generated financial product.

Thus:

Digital consent ≠ automatically informed consent.

15. Case 3 — STS 1239/2020 — Mortgage Floor Clause

In STS 1239/2020, the Supreme Court addressed the consequences of invalidity of a non-transparent floor clause and restitution of amounts improperly collected.

The Court followed the developing EU/Spanish jurisprudence requiring effective restitution where the clause was invalid.

Relevance

For experimental finance, this demonstrates an important rule:

If an innovative financial product violates mandatory consumer law, its experimental or technological nature does not automatically protect the financial institution from legal consequences.

16. Case 4 — Banco Popular / CJEU, Case C-687/23

This is especially important for modern banking regulation.

The Banco Popular resolution involved:

• the Single Resolution Board;
• write-down of shares;
• conversion of Tier 2 instruments;
• transfer to Banco Santander.

In Case C-687/23, Banco Santander (Resolution of Banco Popular III), the CJEU considered claims arising from transactions preceding the resolution of Banco Popular and their relationship with the EU bank-resolution framework.

Relevance to experimental financial systems

It illustrates the importance of:

• bank resolution;
• investor protection;
• regulatory intervention;
• continuity of liabilities;
• allocation of losses.

An experimental financial system must therefore be designed with the possibility of failure and resolution, not merely successful commercial deployment.

17. Case 5 — ACMO and Others v SRB, T-330/20

The General Court considered litigation concerning the resolution of Banco Popular and the refusal of compensation to affected shareholders and creditors.

The case concerned, among other things, the assessment of the “difference in treatment” following resolution and the independence of the valuer.

Relevance

Experimental financial regulation similarly requires:

• independent evaluation;
• reliable valuation;
• supervisory accountability;
• protection against arbitrary regulatory outcomes.

This is particularly important where innovative financial institutions hold digital or tokenised assets whose valuation may be uncertain.

18. Case 6 — Molina Fernández v SRB, T-304/20

The General Court addressed litigation arising from Banco Popular's resolution and issues concerning the compensation assessment for affected shareholders and creditors.

Principle relevant to experimental finance

Financial innovation cannot be separated from the traditional principles of:

• regulatory accountability;
• property rights;
• valuation;
• proportionality;
• procedural fairness.

Thus, a regulator supervising a new financial technology must still operate within the wider legal framework protecting affected persons.

19. Case 7 — Relea Álvarez and Others v SRB, T-653/17

The case concerned challenges connected with the Banco Popular resolution.

The General Court ultimately treated the action as inadmissible in its 2025 order.

Relevance

This demonstrates an important procedural principle:

Not every regulatory measure is necessarily open to the same type of judicial challenge.

For experimental financial systems, this highlights the importance of understanding:

• which authority has acted;
• what type of administrative measure has been adopted;
• whether the measure is directly challengeable;
• what judicial remedy is available.

20. Case 8 — Spanish Supreme Court, 2024 Banco Popular jurisprudence

The Spanish Supreme Court continued to deal with claims involving the acquisition of Banco Popular shares.

For example, STS 1521/2024 concerned acquisition of preferential subscription rights and Banco Popular shares and applied the CJEU's jurisprudence concerning the consequences of bank resolution.

The Supreme Court's later Banco Popular decisions reinforce the importance of the EU Bank Recovery and Resolution framework when assessing post-resolution investor claims.

Relevance

For experimental financial systems, the lesson is:

A fintech product must be designed with the applicable insolvency and resolution framework in mind from the beginning.

21. Case 9 — STS 5185/2025 — Banco Popular

In STS 5185/2025, the Spanish Supreme Court reiterated the implications of the CJEU's 5 May 2022 judgment, C-410/20, concerning actions brought by purchasers of Banco Popular shares after the bank's resolution.

The Court considered claims based on alleged information deficiencies and reiterated the consequences of the EU resolution framework.

Experimental-finance significance

This case demonstrates that:

innovation + investment product + bank failure = interaction between financial innovation law and resolution law.

A new financial system cannot be analysed solely through fintech regulation.

22. Case 10 — ADICAE Collective Floor-Clause Litigation

In June 2025, the Spanish Supreme Court rejected appeals by financial institutions in collective litigation brought by ADICAE concerning floor clauses.

The litigation involved more than 800 consumers and more than 100 financial institutions.

Relevance

This demonstrates the potential scale effect of banking misconduct.

The same principle becomes even more significant with algorithmic financial systems.

An error in a manual banking contract may affect thousands.

An error in a centrally deployed algorithm may affect millions.

Therefore, experimental financial systems require rigorous testing before deployment.

23. Key Legal Principles Emerging from the Cases

The case law can be synthesised into several principles.

Principle 1 — Technology does not eliminate transparency

A bank cannot defend an unfair or incomprehensible product merely by saying that the customer accepted it electronically.

Principle 2 — Consumer protection remains mandatory

Sandbox participation does not create immunity from consumer law.

Principle 3 — Regulatory innovation must remain accountable

Authorities must operate within their statutory powers and applicable administrative principles.

Principle 4 — Financial innovation must consider failure

A financial technology must be capable of being unwound, terminated or transferred safely.

Principle 5 — Valuation matters

This is particularly relevant to:

• crypto-assets;
• tokenised securities;
• digital investment products;
• algorithmically priced assets.

Principle 6 — EU law is fundamental

Spanish experimental finance exists within the broader framework of:

• EU banking law;
• Banking Union;
• MiFID;
• PSD;
• AML rules;
• GDPR;
• digital-finance regulation.

24. Experimental Finance and DORA

The Digital Operational Resilience Act (DORA) has become particularly significant for technologically dependent financial institutions.

Its basic philosophy is closely related to experimental finance:

Financial innovation must remain operationally resilient.

Relevant risks include:

• cyberattacks;
• cloud-service failures;
• software vulnerabilities;
• ICT outages;
• third-party technology providers;
• data integrity problems.

Therefore, an experimental financial system cannot focus solely on whether the technology performs its intended function.

It must also ask:

What happens when the technology fails?

25. AI and Experimental Banking

AI is one of the most important future applications of Spain's experimental financial framework.

Consider an AI lending model:

Applicant → data collection → AI scoring → credit decision → loan

Legal issues include:

Bias

Could the model indirectly discriminate against particular groups?

Explainability

Can the customer understand why credit was denied?

Accuracy

What happens if incorrect data produces an incorrect score?

Data protection

Was the data lawfully processed?

Human oversight

Can a human review an automated decision?

Liability

Who is responsible?

• Bank?
• Fintech?
• AI developer?
• Cloud provider?

These questions illustrate why controlled experimentation can be useful before large-scale deployment.

26. Blockchain and Tokenised Finance

Blockchain creates another important experimental area.

Possible applications include:

• tokenised deposits;
• tokenised securities;
• blockchain settlement;
• smart contracts;
• digital collateral;
• programmable payments.

But legal classification remains critical.

A token may potentially fall within different regulatory regimes depending upon its legal and economic characteristics.

Therefore:

“Blockchain” is a technology, not automatically a legal category.

The applicable banking, securities, payments, AML and consumer rules depend upon what the technology actually does.

27. Experimental Payments

Spain's financial system also provides a useful environment for testing innovative payment technologies.

Potential experiments include:

• biometric payments;
• instant payments;
• programmable payment systems;
• API-based banking;
• open-banking applications;
• fraud-detection systems;
• digital identity.

The fundamental legal question remains:

Does the innovation improve the payment system without undermining security, consumer protection and financial integrity?

28. RegTech and SupTech

Experimental financial systems are not limited to private companies.

They can also improve regulation itself.

RegTech

Technology used by financial institutions to comply with regulation.

Examples:

• automated AML;
• automated reporting;
• regulatory monitoring;
• transaction surveillance.

SupTech

Technology used by regulators.

Examples:

• AI-based supervisory analytics;
• automated risk detection;
• systemic-risk monitoring;
• real-time financial data analysis.

Law 7/2020 expressly recognises innovation that can improve regulation and financial supervision as a possible source of added value.

29. Advantages of the Spanish Model

1. Encourages fintech innovation

Entrepreneurs can test new financial technologies.

2. Reduces regulatory uncertainty

Innovators can interact with competent authorities.

3. Improves supervision

Regulators learn about technologies before they become widespread.

4. Protects consumers

Experiments occur within controlled parameters.

5. Identifies legislative gaps

Testing may reveal outdated laws.

6. Supports financial-sector efficiency

Successful innovations may reduce costs and improve services.

7. Promotes responsible innovation

The objective is not “innovation at any cost.”

30. Limitations and Risks

A. Regulatory arbitrage

Companies might attempt to use experimental environments to avoid ordinary regulation.

Response: strict eligibility and supervision.

B. Consumer experimentation

Real consumers could potentially be exposed to technological risks.

Response: informed consent, safeguards and compensation mechanisms.

C. False confidence

A successful small-scale test does not necessarily prove that technology is safe at national scale.

D. Regulatory fragmentation

Banking, securities, insurance, data protection and AML authorities may all have different responsibilities.

E. Systemic risk

A technology that works perfectly in isolation may become dangerous when adopted throughout the financial system.

31. Difference Between Ordinary Banking Regulation and Experimental Finance

32. Legal Relationship Between Sandbox and Banking Licence

This is a crucial examination point.

Sandbox admission ≠ banking licence.

A company cannot say:

“We were admitted to the Spanish regulatory sandbox, therefore we are authorised to operate as a bank.”

That is incorrect.

The Spanish framework specifically states that sandbox participation does not itself authorise the commencement of a reserved activity or habitual professional provision of financial services.

Therefore:

Sandbox → testing

whereas

Banking licence → authorised commercial banking activity

These are legally different.

33. Hypothetical Example

Suppose FinAI España S.L. develops an AI system that predicts whether a customer is likely to repay a loan.

It wants to test the system on 500 consumers.

Step 1

It submits a sandbox application.

Step 2

The authorities assess:

• technological innovation;
• maturity;
• potential benefit;
• systemic impact.

Step 3

A testing protocol is established.

Step 4

Consumers receive appropriate information and safeguards.

Step 5

The system is monitored.

Step 6

The regulator examines:

• accuracy;
• discrimination;
• consumer outcomes;
• data protection;
• AML implications;
• operational resilience.

Step 7

The final report identifies whether:

• the technology is suitable;
• regulatory barriers exist;
• additional safeguards are necessary;
• an ordinary licence/authorisation is required.

This illustrates how experimental finance operates as a bridge between innovation and formal regulation.

34. Important Exam Conclusion

Spain's experimental financial system represents a shift from a purely “regulate after innovation” model toward a more “test, supervise and regulate intelligently” model.

The Spanish regulatory sandbox under Law 7/2020 is the centrepiece of this approach. It allows technology-based financial innovation to be tested under controlled conditions while preserving:

• financial stability;
• consumer protection;
• data protection;
• AML/CFT controls;
• regulatory supervision;
• legal accountability.

The Banco de España, CNMV and DGSFP play important supervisory roles depending upon the activity. The sandbox is coordinated through the Treasury framework, and current Spanish authorities continue to operate successive cohorts.

The case law, although not yet dominated by direct sandbox litigation, supplies important principles through banking and financial disputes such as STS 1916/2013 on floor clauses, the Caja Segovia transparency cases, STS 1239/2020, the Banco Popular litigation, C-687/23, T-330/20, T-304/20 and subsequent Banco Popular Supreme Court decisions. These authorities demonstrate that innovation cannot displace transparency, consumer protection, regulatory accountability, valuation principles or EU bank-resolution law.

Short exam formula

Spanish Experimental Financial System =

Law 7/2020 + Regulatory Sandbox + Banco de España/CNMV/DGSFP supervision + Controlled Testing + Consumer Protection + Data Protection + AML/CFT + Financial Stability + EU Digital-Finance Law + Judicial Accountability.