On Saturday, February 3rd, the much-anticipated Fintech Law, officially named Ley Fintec, was enacted in Chile following its approval on October 12, 2022. This law introduces a general framework designed to encourage the provision of financial services via technological means, marking a significant milestone for the Chilean fintech ecosystem.
According to the Legal department at the crowdfunding platform Broota, “The Fintech Law and General Rule No. 502 represent a forward step in regulating Fintech services to combat illicit activities and money laundering potentially arising from these services, setting minimum standards based on the business volume and client numbers that Fintech companies must comply with.”
David Alvo, managing partner at Impacta VC, in a conversation with Startups Latam highlighted the balance between regulatory pace and building trust within the startup ecosystem, stating, “Regulation never helped the speed of any startup, but I believe it aids in trust-building, especially in an industry that is at a point of establishing trust. So, I see it as a positive development.”
With the law now in effect, fintech companies offering services such as crowdfunding platforms, alternative transaction systems, credit advisory, custody of financial instruments, order routing, and intermediation of financial instruments must submit registration and authorization applications for their activities by February 3, 2025. Those who have applied can continue their services until the Financial Market Commission (CMF) decides on their applications.
Furthermore, starting from February 3, 2024, no entity will be allowed to provide investment advisory services without being registered and authorized by the CMF.
Alvo believes the 12-month preparation period is sufficient, suggesting, “Those doing things correctly won’t have a problem, and those who are not will likely resist regulation because they don’t want to be regulated or reviewed. This will ‘skim’ the industry, keeping the best and leaving the rest out.”
Broota adds that the new regulations could pose an entry barrier for new market entrants due to the high costs of implementing minimum policies, categorizing each business block, and hiring expert personnel, indicating a significant impact on the competitive landscape.