Last week, was presented in Chile the preliminary draft of the Fintech Law that had been in the works for some months in the country was introduced in the country. This, in line with other Latin American countries, such as Mexico and Brazil, that since 2018 onwards, have already launched their regulations in the matter.
Fintech laws seek to deliver a legal framework for all companies of this type that operate in countries, which have started to increase rapidly. In the region, a special growth of this industry has been seen, with more than 1,075 fintech companies in total. Of all, Brazil is the strongest: it has 489 entities and a raised capital that reaches USD $6.200 million.
For almost two years now, Chile had been talking about implementing a Fintech Law. In 2018, the Commission for the Financial Market (CMF) began to organize instances of consultation and discussion with industry actors, such as FinteChile, where they had the advice of different professionals and the Inter-American Development Bank (IDB).
The definitive commission, composed of professionals Ana María Montoya and Rosario Celedón, delivered the preliminary draft fintech regulation for Chile some days ago. The document proposes to legislate collective financing platforms or crowdfunding, and alternative transaction systems, among other entities related to the stock market.
In simple words, the regulatory perimeter includes these figures:
Platforms of collective financing or crowdfunding: This is a physical or virtual platform where those who have investment projects or financing needs, disseminate their projects and contact those who have resources available for those needs. An example would be Cumplo or RedCapital.
Alternative transaction systems: This is the physical or virtual place that allows its participants to list or trade public offer financial instruments, and that is not authorized to act like a stock exchange or products exchange. This includes all entities that manage resources from third parties for the purchase of a security.
Order routers and financial instrument intermediaries: Refers to receiving and channeling orders from third parties to purchaseor sell financial instruments to securities intermediaries, stockbrokers brokers, etc.
Custodians of financial instruments: Explained as holding financial instruments on its own behalf or on third parties, or keeping money or foreign currency on their behalf. Any company that keeps something for you, for example, a company that holds cryptocurrencies, fits within this category.
Credit advisers: Those who deliver recommendations to third parties respecting payment capabilities of persons or institutions. Companies that generate assessments or risk scores.
For the design of Chilean fintech regulation to allow promoting innovation, entrepreneurship, financial inclusion, the development of new sources of financing and the increase in competition, the Fintech bill in Chile is based on five basic pillars:
Proportionality, with differentiated and proportional demands according to the inherent risks of each entity's activities.
Neutrality, without regulatory asymmetries between companies that use more and those that use less technology.
Integrity, for the regulation applicable to crowdfunding to comply with its purpose, must regulate services connected to the platform.
Flexibility, that must allow for different business models to co-exist and that these can change in time, without adapting the law.
Modularity, where regulation must recognize that the service traditionally rendered can be broken down with technology, and therefore there can be service providers who only perform a component of the value chain.
The preliminary draft law must still continue to be discussed and become a formal draft that is submitted to Congress, where it must pass through the corresponding representatives' houses, so it could take some time before enacting the final legislation.
In Mexico, there is a Fintech Law since 2018, which mainly regulates e-payment funds and crowdfunding institutions. Some months ago, they began implementing a regulatory sandbox, which is an experimental space that allows testing financial services in a framework that is controlled and approved by regulators.
In January of this year, the National Banking and Securities Commission (CNBV in Spanish) had already received five requests to operate under the sandbox model, of which three are in process and two have ceased and desisted.
Another country that has a regulatory sandbox, but is still without official Fintech law, is Colombia, called La Arenera, and is implemented by the Financial Superintendence. About four months ago, they announced that pilots with crypto assets in the sandbox could be made. Some alliances that had approval were Banco de Bogotá with Bitso, and Bancolombia with Buda, who will have the possibility of testing their models from March onwards.
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