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Regulatory Sandboxes in the Federal Government

In Budget 2024, the Government committed to enable broader use of regulatory sandboxes across government, including announcing its intent to introduce amendments to the Red Tape Reduction Act to provide all Ministers with the authority to issue exemptions for the purpose of enabling regulatory sandboxes.

To support the Government’s commitment in Budget 2024, the Treasury Board of Canada Secretariat (TBS) is developing a proposed federal framework for regulatory sandboxes, informed by discussions with federal regulators as well as a public consultation on the Let’s Talk Federal Regulations platform (What We Heard Report).

What are Regulatory Sandboxes?

A regulatory sandbox is a tool that allows regulators to learn how to incorporate or best regulate innovation before making permanent regulatory changes. It allows for temporary limited authorizations of innovation and demonstrates how regulatory regimes could be modernized, while under regulatory supervision. Evidence gathered can help a regulator decide whether to make any permanent changes, including how an innovative product, service, process, regulatory approaches, or non-regulatory approach should be managed.

For example, regulators may want to understand how a regulatory approach would work for a new technology that is not currently permitted under existing regulation. In these cases, regulators could enable regulatory sandboxes by issuing temporary authorization from specific legislative or regulatory requirements. This allows them to evaluate how the new technology could be regulated in a modern or innovative way.  

Regulators can actively monitor the implementation of the new technology and establish conditions to ensure that consumer protections are upheld throughout the process. If any unexpected risks emerge or the situation changes, regulators have the flexibility to adjust the conditions or terminate the regulatory sandbox, as needed.

The evidence gathered from the regulatory sandbox can provide valuable insights. This data helps regulators make informed decisions about permanently allowing the technology, ensuring that it is safely and effectively integrated into the market. By learning from these regulatory sandboxes, regulators can determine how they should design and manage regulations and create modernized frameworks that are more effective and well-suited to innovation.

Examples of Regulatory Sandboxes

Below are examples of regulatory sandboxes that federal regulators have undertaken.  

Only a few federal departments and agencies currently have the authority to run regulatory sandboxes and fewer have yet launched any. Under the proposed federal framework for regulatory sandboxes, all ministers will have the opportunity to implement them.  

(Project titles are hyperlinked with additional information if available)

Department/Agency	Regulatory Sandbox Title	Regulatory Sandbox Description
Transport Canada	Remotely Piloted Aircraft Systems (2019 – ongoing)	Remotely Piloted Aircraft Systems, or drones, have become increasingly popular over the last several years. To address the safety risks associated with the growing number of drone operations, Transport Canada introduced Part IX of the Canadian Aviation Regulations (CARs) in January 2019. These rules outline the regulations for drone flights in Canada. However, the regulation did not fully cover beyond visual line-of-sight (BVLOS) operations and other innovative drone uses, which are crucial for extending operational range, improving efficiency, accessing remote areas, reducing costs, and enhancing safety. Transport Canada has used their authority under the Aeronautics Act to issue exemptions and special licences for testing currently prohibited or unregulated drone activities under government supervision. This includes BVLOS operations in sparsely populated areas, below 400 feet, using visual observer detect and avoid (DAA) functions, and, in some cases, testing technological solutions for DAA. The evidence gathered from this regulatory sandbox has supported Transport Canada’s decision to make amendments to the Canadian Aviation Regulations regarding drone use in Canada. These changes, specifically for lower-risk BVLOS operations, will come into force on April 1, 2025.
Transport Canada	Electronic Shipping Documents (2020-2022)	The Transportation of Dangerous Goods Regulations previously required a physical paper shipping document to accompany most dangerous goods while in transport. To modernize this process, Transport Canada initiated a two-year regulatory sandbox to explore using electronic shipping documents instead of paper ones. The primary goal was to determine if using electronic shipping documents could be as safe or safer than traditional paper documents. By reducing paperwork, the initiative aimed to modernize the regulations and streamline the transportation process. Throughout the regulatory sandbox, Transport Canada collaborated with industry stakeholders to pilot various digital platforms, ensuring they met stringent security and accessibility standards. Based on the findings, Transport Canada has modernized parts of the Transportation of Dangerous Goods Regulations to reduce the administrative burden and allow the use of electronic shipping documents for transport by rail and by remotely piloted aircraft systems. One of the key benefits of this initiative was the enhanced ability of first responders to access crucial information remotely, helping them avoid potential hazards. The speed and accuracy of information sharing were significantly improved, leading to more efficient and safer transportation processes. Additionally, the adoption of electronic shipping documents resulted in substantial environmental benefits, with participants saving 21 million sheets of paper, significantly reducing paper and ink usage.
Transport Canada	Light Sport Aircraft (LSA) (2021-2025)	Per Canadian Aviation Regulations, Flight Training Units (FTUs) must have a Certificate of Airworthiness for their aircraft. Despite the potential benefits of using Light Sports Aircraft (LSA) for flight training, LSAs do not have such certification, making them unusable by FTUs. Incorporating LSAs could reduce costs for Canadian businesses, integrate new technologies into current practices, lower emissions and pollution with more fuel-efficient training aircraft, and enhance Canada's international competitiveness. To explore this need, Transport Canada, supported by funding from the CRI’s Regulatory Experimentation Expense Fund, enabled a regulatory sandbox to determine if LSAs can safely be used for flight training under an alternative regulatory approach. The goal of the regulatory sandbox is to assess the reliability and suitability of LSAs in training environments, focusing on their performance, emissions, and noise level. Transport Canada issued regulatory exemptions (CTA-001-2024) allowing LSAs to be used without the required Certificate of Airworthiness. The learnings from the regulatory sandbox will be used to inform the development of an appropriate regulatory framework to support the safe use of these innovative aircrafts.

Questions?

If you have any questions, please contact the CRI at: cri-cir@tbs-sct.gc.ca.