This paper provides a comprehensive case study of Israel’s emerging regulatory sandbox frameworks for AI applications. Drawing from policy white papers, legislative materials, and implemented frameworks, it documents how Israel is adopting sector-specific regulatory sandboxes as experimental mechanisms to balance innovation with public interest concerns. The paper maps the growing appeal of regulatory sandboxes across Israeli AI policy documents since 2018 and provides a detailed analysis of three key implementations: autonomous vehicles, fintech, and general legislative guidelines. It examines Israel’s pioneering AV regulatory sandbox, which grants specific exemptions from traffic regulations (including steering wheel control requirements and international standards compliance) while maintaining safety oversight through control centers and incident reporting. The paper analyzes the proposed fintech sandbox’s multi-regulator committee structure and dual-track system for licensing and oversight relief. It also evaluates the recently published general regulatory sandbox legislative guidelines that establish a technology-neutral four-phase lifecycle framework. The analysis reveals Israel’s preference for adapting existing regulatory structures rather than creating comprehensive AI-specific governance mechanisms. While this sector-specific approach facilitates targeted innovation, it may inadequately address broader AI governance concerns such as algorithmic accountability and human oversight. The paper critically examines institutional design challenges, including inter-agency coordination difficulties in the fintech framework and the tension between innovation facilitation and consumer protection. It concludes that Israel’s approach represents a pragmatic response to technological uncertainty, though questions remain about implementation effectiveness and the adequacy of sector-specific frameworks for comprehensive AI governance. The study contributes to comparative regulatory literature by documenting an understudied jurisdiction’s approach to regulatory experimentation.

How can existing experiences of regulatory experimentation inform AI sandbox design in Europe? This paper explores the ‘responsible AI’ sandbox of the Norwegian Data Protection Agency (DPA), a GDPR-oriented regulatory experiment created in 2020 with four projects per annum. Through an interpretive policy analysis of documents (exit reports and workshop transcripts) and semi-structured interviews with officials, we explore how the Norwegian DPA approached its mandate of ‘helping with responsible innovation’, where it identified role conflicts, and what scope conditions and challenges it perceived around sandbox work. Sandboxing represented a ‘new way of working’ for the regulatory authority: in an idea-based intervention mode, the DPA moves from rule-based interventions as a watchdog to becoming a dialogue-oriented partner in solution-finding, a concretiser of ambiguous GDPR rules, and a keen learner from sectoral and technical experts. Critical engagement with our data suggests that sandbox design should not be reduced to technical and procedural questions. It requires regulators’ critical reflexivity on their ambivalent role and power relations in the regulatory experiment: how to strategically select relevant projects and issues, how to navigate budgetary constraints and the lack of follow-ups, and how sandboxing affects more interventionist regulatory duties.

Online supply-chain financing has been a relatively novel funding channel for suppliers as small- and medium-sized enterprises (“SMEs”) to obtain loans in that the revolution of financial technology (“FinTech”) transforms traditional supply-chain financing, which used to be administered only by official banks, to an online model also used by electronic commerce platforms (“e-commerce platform”). Endeavours towards financial inclusion of the underserved SMEs could rationalize why we should allow for or encourage FinTech innovations exemplified by the online supply-chain financing mentioned above. What would be an adaptive regulatory regime for such innovative FinTech-enabled financial services as the online supply-chain financing? Within our conceptual framework to regulate the FinTech industry at the early stage, rather than rigorous rules traditionally placed on large financial institutions, a principles-based strategy should be adopted to strike a balance between financial stability and access to financial services advanced by disruptive innovations. As a necessary complement, regulatory sandboxes would be needed to spur a shift in institutional philosophy to a principles-based regulatory regime. In other words, the regulatory attitude of FinTech regulation should be humble and light-touch to promote innovation for improving digital financial inclusion, albeit on the premise of containing potential systemic risk and protecting consumer interest in the meantime.