This report focuses on regulatory sandboxes in artificial intelligence (AI), where authorities engage firms to test innovative products or services that challenge existing legal frameworks. Participating firms obtain a waiver from specific legal provisions or compliance processes to innovate. It highlights positive impacts like increased venture capital investment in fintech start-ups. It points out challenges, risks, and policy considerations for AI sandboxes, emphasising interdisciplinary cooperation, building AI expertise, regulatory interoperability, and trade policy. It also addresses the importance of comprehensive criteria for eligibility and assessing trials, as well as the impact on innovation and competition.