On February 3, various changes called the Fintech Act were introduced Open BankIn Chile. For many actors, the Act represents a significant step forward in promoting financial innovation and greater competition in the financial system, as well as promoting new financial products and services for consumers.
“This regulation regulates the registration, authorization and obligations of the following providers of financial services: collective financing platforms (CFP), alternative transaction systems (SAT), credit advice, investment advice, security of financial instruments, regulatory routing and intermediate instruments of funds,” said the management of FinteChile. Director Angel Sierra explained to AmericaEconomia.
This institute unites the highest percentage of these institutes in the country.
In particular, this Regulation modifies Law 18,045 of the Securities Market (“LMV”), Law 18,046 of Public Limited Companies (“LSA”) and the Commercial Code, inter alia, changes the concept of an open company and, therefore, their securities registry maintained by the Financial Markets Authority (CMF). Requirements for public limited companies obliged to register shares.
“This regulation brings legal certainty to both users and financial service providers, so we envision greater confidence in Fintech services, which will translate into greater innovation, competition and financial inclusion for people and companies,” says Sierra.
Open Bank Y Cryptoassets
Among the key aspects contemplated by the new regulations is that certain technology-based financial services do not have their own legal framework, which has created regulatory difficulties that have hindered their development in Chile.
Companies that carry out intermediary and custodial activities, providing trading platforms and advising on financial instruments (including crypto-assets and contracts for difference) are regulated. Commission for Financial Markets And they must demonstrate compliance with the requirements established by the authority to operate.
The use of cryptoassets as a means of payment is authorized, exercising the powers of the Central Bank of Chile to determine the value of cryptoassets and to be backed by money (“Fixed Currencies“), which meets the requirements established by the issuing organization.
Various laws governing traditional financial institutions are being modified to achieve regulatory symmetry in the provision of similar financial services, and some barriers to entry for FinTech institutions, such as access to checking accounts, are being reduced.
In addition, an open financial system (open banking) was created to enable financial service providers to exchange customer financial information, address information asymmetries faced by incoming actors, and develop new financial product and service offerings.
Another feature is that it regulates payment initiation service providers who may offer services for making electronic transfers from customers' accounts to third-party accounts.
All this will create more competition in the payments market and reduce the use of cash, according to an analysis by local law firm Barros & Errázuriz.
Implementation Step by step
Solange Bernstein, head of the Financial Market Commission, described the regulation as one of the milestones of 2023 (the year the law is approved) and defined it as particularly challenging because it involves finding a balance between guaranteeing customer protection. At the same time promoting the growth of the industry.
“We came to regulate an industry that was outside the periphery and it was already operating, therefore, it was very complex. We had to do several working groups to better understand the business models, because from the point of view of prudence (…) the challenge for us was how to balance our regulation. And to be sure that this business model is not. It is going to mean that people will be disappointed later,” he said at the event Chócale Live from specialized media. Coke.
In line with this practice, the promulgation of regulations regulating financial service providers contemplated by this Act has recently been announced.
Berstein also pointed out that Chile is a pioneer in creating specialized regulations for this type of industry, highlighting the great impact that regulation can have on innovation, especially in the products offered.
“We're going to have a different ecosystem, not just the new companies, but the way they interact and the existing companies, the incumbents, the current regulated and the entrants into the perimeter will need more information. Will be different, and then the value proposition to people will be different,” he explained.
Other changes introduced by the fintech law will come into effect once the CMF publishes the relevant regulations, which will have 18 months until the law is published (which happened on January 4, 2023).
This situation includes changes related to the open financial system and new products and services entering the regulatory framework, which is “Fintech” (activities involving the use and application of innovation and technological advances for the design, offer and provision of financial products. and services).
In fact, according to Fintechile, its implementation will create the biggest challenge for the coming year.
“The big challenge of 2024 is the publication of the regulations for the implementation of the open financial system, which will happen in June or July, so we will see the industry very active throughout the first semester, contributing with contributions and recommendations. CMF,” Sierra concluded.
Fintech law takes effect: spurs development of new financial products and services was originally published in Economics and Business News.