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Contxto – For the moment fintech founders and venture capital (VC) firms in Chile are celebrating. This week news broke that the government in Santiago is drafting a law to regulate fintechs. The proposal would then be presented to congress halfway through 2020.
Considering how slow legislative processes tend to be, this is quite speedy. So for fintechs, it’s seen as a sign of the value authorities are giving to their tech solutions.
“Finally!”, say fintechs in Chile
So why the rush?
Chile’s Minister of Finance, Ignacio Briones made the announcement to the country’s Commission on Economy.
Briones explained that his administration is prioritizing this law for multiple reasons. First (and probably foremost) on the grounds of furthering financial inclusion and creating jobs. He also cited that it would encourage healthy competition, as well as reduce costs within financial markets.
Those are all fairly valid arguments. But to that one can add that the coronavirus (Covid-19) pandemic and inbound economic recession likely highlighted these points further.
So it’s not under “ideal” circumstances that Chile is finally exploring this type of regulation. But either way, fintechs are pleased that it’s happening.
Ángel Sierra, Executive Director at the FinteChile Association emphasized that he hopes this law is evaluated quickly and that it be flexible too. Otherwise, it will backfire and inhibit innovation within the financial sector altogether.
Sierra also stated that this law should be thought out to place Chile on the map as the financial hub within the region.
The need for regulation in the region
Mexico made headlines less than two years ago with legislative approval of its fintech law. After which it became quite the hotspot for startups and businesses with technological solutions in banking and finance. Now Chile wants to do the same.
Rightly so, fintechs can flourish under regulatory systems that aren’t too restrictive. Just the same, they can be weighed down by excessive requirements.
And at the moment, there’s still a lot of room to grow in the region as far as fintech laws are concerned. In that sense, Mexico is the only country with more robust regulation on the matter. Meanwhile, Colombia has a decree that validated crowdfunding back in 2018.
For Brazil, there’s no “all-encompassing” fintech law. But rather the Central Bank has played a role in enacting regulation that encourages the participation of loaning fintechs within the industry, for example.
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