Written by León Lanis V., Paralegal
Slowly but steadily Chile is starting to realise the importance of regulating technology in order to encourage business, innovation and the adaptation of the legal system to the new industrial revolution — technology.
In November 2020, the Chilean Chamber of Commerce (CMF) gave to the Ministry of Finance a draft bill called “Fintech Law in the Securities Market”. This being said, the bill is still a while from being made into law, as it still needs to be reviewed by the Minister’s cabinet, be subject to amendments, and then finally receive the President’s approval.
What is Fintech?
Fintech refers to “Financial Technologies”, the name for the industry behind the application of technologies of information and communication (TIC) to the financial services and business. In the last 5 years, Fintech has boomed in Chile having over 100 and even an association of companies belonging to the guild.
Although Fintech has many applications, from personal finance with a user’s smartphone to stock trading technologies, the CMF’s draft considers the regulation of two important concepts from the financial technologies business: Crowdfunding and Crowdlending. Let’s take a moment to analyse both.
- Crowdfunding: it is defined as “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically by internet”. Many startups have found success via crowdfunding, as they create a good relationship with future consumers and investors and create better chances to get their way in markets. Some of the best known crowdfunding sites include GoFundMe, IndieGogo and Patreon.
- Crowdlending: this is an innovative, decentralised technology that lets individuals lend each other microcredits supported by a distributed peer to peer network (very similar to how Blockchain works), without the intervention of a financial institution.
What to know about the new bill
From the draft submitted to the Ministry, we can highlight the following aspects:
- It gives various definitions related to fintech: it contains 12 definitions, which include, for example, alternative transaction systems, crypto assets (the definition caused controversy in the cryptocurrency world), etc.
- It creates a Financial Services Provider registry with requisites: the CMF is seeking to generate a high standard regulation for any Fintech Business, ordering all providers to follow the requisites in order to be part of the registry. These requirements will be exclusively modified by the CMF.
- A risk-based regulation model is adopted: the draft will be enforced to any Fintech related business, but it will adapt to the proportions of the business and the risk they represent to the public finances.
- Cryptoassets: this is the first law in Chile that recognises crypto assets, the CMF, as previously mentioned, tries to define it as “a digital representation of exchange units currency, goods and services. This raised some alerts in the crypto community, as it does not recognise the decentralised aspect of a crypto asset.
Chile is embarking on the difficult task of regulating technologies. The motion demonstrates the proactivity of the region, and though we are yet to see what this draft evolves to, the bill should consider in the future the full spectre of activities that Fintech involves. Players in the industry will follow the bill’s progress with great interest.
Harris Gomez Group is an English and Spanish speaking law firm with 25 years experience based in Sydney, with sister offices in Chile and Colombia. We specialise in business, technology and corporations law and cross-border issues. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets. We are members of both Australian Latin American Business Council (ALABC) and Auscham.
To better understand how we can support you, please contact Harris Gomez at hmg@hgomezgroup.com
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