Fintech Law Project: An Advance in the Regulation of Companies Providing Technological Financial Services

On October 12 of this year, the Fintech Bill was approved by the Senate, moving on to the Chamber of Deputies, and if approved, will be enacted into law by the President of the Republic.

This bill emerges in response to the need for a legal framework to regulate entities that provide financial services through technology, due to the significant development these industries have experienced in recent years. They have shown exponential growth thanks to the global pandemic caused by COVID-19, which led to a rapid advancement of such technological services.

Thus, the Fintech law aims to primarily regulate two areas: 1. Establish a regulatory framework to promote and facilitate the incorporation of technology in financial innovation, and 2. Promote an Open Banking system.

Regarding the first point, this law intends to incorporate and regulate the following Fintech-based services:

• Crowdfunding platforms.
• Alternative systems for transacting securities and financial instruments (including cryptocurrencies).
• Credit and investment advisory services.
• Custody of financial instruments.
• Order routers and intermediaries of financial instruments.

In this way, financial entities wishing to provide these types of services must be registered in a Financial Service Providers Registry, which will be administered by the Commission for the Financial Market (CMF). This institution will be responsible for the regulation, oversight, and supervision of these entities, as indicated by the bill.

In connection with the second point, the bill aims to incorporate an Open Banking system whose main objective is to allow different financial service providers to exchange their clients' financial information quickly and securely through a remote and automated access interface. However, the bill refers not only to client information but also to information about the general terms and conditions of the financial products and services offered to the public by these entities.

Moreover, the bill highlights the importance of client consent to be part of this system. Clients must grant it beforehand, freely, informed, expressly, and specifically. Financial entities must take the necessary measures to comply with the minimum standards for information security, cybersecurity, and risk management and confidentiality policies to prevent unauthorized disclosure or modification of information.

Additionally, it is important to note that the enactment of this law will also have implications for other legal bodies, as it introduces changes, for example, to the Securities Market Law No. 18.045, the Central Bank Law No. 18.840, the Corporations Law No. 18.046, and the decree with the force of law No. 3 of 1997 from the Ministry of Finance, which establishes the General Banking Law, among others.

In conclusion, the Fintech Law seeks to establish a specific regulatory framework for Fintech companies, which they currently lack. This framework will allow for the proper development of these institutions, focusing on creating an order for the provision of technological financial services and an open banking system, in which the CMF will play a prominent role in registration and oversight.