In early February 2021, Chile's financial regulator, the Commission for the Financial Market (“CMF”), made public the blueprint: "Fintech Law in the Securities Market Spheres" that was delivered to the Ministry of Finance during November 2020 for further processing.
This draft law has been the fruit of extensive work carried out by the CMF since 2018 and in which the leadership of the then Commissioner, today Vice President, Kevin Cowan and the then, Intendant of Securities, today General Director of Market Conduct Regulation, Patricio Valenzuela.
The preliminary draft is still far from becoming law, since it must go through the suggestions and changes of the Ministry of Finance and the General Secretariat of the Presidency, so that it has the presidential signature and is formally a bill that is processed by Congress. .
Notwithstanding this, it is gratifying to observe how the CMF proposes a modern model of legislation, based on risks and that promotes competition in the financial industry while maintaining the integrity of the market.
This draft law only contemplates the securities market aspects of the Fintech industry. Its focus is on the promotion and regulation of crowdfunding services crowdfunding y crowdlending, be these in their capital or debt variants.
Some have criticized that this document does not incorporate normative elements in the area of means of payment or proper banking regulation. For this part, it is understandable that it has not been stated that the regulation of the means of payment corresponds to the Central Bank of Chile and not to the CMF. In addition, work on this bill began in 2018, before the CMF had the new regulatory powers of the banking sector that belonged to the former Superintendency of Banks and Financial Institutions (“SBIF”).
From the preliminary draft we can highlight the following aspects:
- Defines certain activities related to the Fintech industry. Such as credit and investment advisory, crypto assets, order routing, financial instrument, crowdfunding platforms, among others.
- The Registry of Financial Service Providers is created. Allowing the development of financial activities defined in the Law to those entities that are previously registered in said registry.
- Se adopts a risk-based regulation model by reserving the CMF the power to ease certain regulatory requirements to those entities that, due to the size of their operations, do not compromise public faith.
- Crypto assets are recognized as financial instruments. With this, this would be the first rule to treat these assets.
- A new debt instrument is created: “Self-registration debt securities”. Those that will have executive force and do not require all the formalities and requirements of the bonds or commercial papers.
- The maximum number of partners of joint-stock companies or closed stock companies is increased before they must register in the Securities Registry. This facilitates a massification of investment in venture capital without the regulatory burdens of public limited companies.
Although, in the current regulatory scenario, registration or special authorization is not required to carry out several of the activities described in this draft law, the lack of regulatory treatment has been recognized by startups themselves as an obstacle to the introduction of relevant investments in the Fintech industry in Chile.
The practical application of this standard, and its ability to promote a competitive and innovative Fintech ecosystem, will also depend on the application of the regulatory power exercised by the CMF through the General Standards that will detail various aspects of this law.
We hope that the Ministry of Finance will deliver the bill soon so that it can become a bill and be processed by Congress. There are still pending tasks in matters related to means of payments, open banking, international exchange operations, use of blockchain in interbank operations, etc. But undoubtedly the publicity of this draft is already an advance.
*The opinions expressed in this article are those of the author and do not necessarily reflect the views of the administrators of The Crypto Legal blog or the Lawgic Tec association.