The rapid growth of the FinTech industry is demanding the enactment of laws. The challenge is to strike a balance between growth, public trust, and development.
Rosario Celedón, one of the members of the Board of Directors of the Commission of Chile for the Financial Market (CMF), states that the fast expansion of the FinTech industry has also accelerated the creation of a regulatory framework. However, she believes that one of the main challenges will be the enactment of laws that do not compromise either technological development or innovation.
In recent days, Celedón said that the rapid expansion of the sector has meant that regulators in Chile are under increasing pressure to enact laws that address FinTech activity. They are clear that the regulatory framework will allow “foreseeing risks, controlling damages, and having someone to assign responsibilities when failures arise,” according to local media.
The commissioner does not doubt that the demand for some financial technology solutions is on the rise, particularly now that the COVID-19 pandemic is affecting the world population, slowing a relevant part of the economy. Given this situation, she believes that the financial services that startups offer are decisive as promoters of financial inclusion and as a source of financing for small companies to bear the economic impact that they are receiving as a result of the slowdown in the economy.
Celedón added that the challenge that regulators face is to be able to propose a regulatory framework that is adequate and proportional to the scales. Besides, she says that this framework should naturally adapt to the developing technological environment, without quickly falling short.
To regulate the FinTech sector, the CMF member added that Chile must focus on applying the same laws with which it addresses the financial market. This process includes providing special licenses for startups focused on financial services, the record of customer information, requirements for accreditation of competence and suitability, and a risk management framework.
It is also appropriate to work within a general data protection framework that has regulation and supervision standards that facilitate the portability of data, according to Celedón. She also said that the owner of the data, in this case, the holder, can consent to the use of their private information, but must also have adequate protection mechanisms.
As financial services providers, FinTech companies have access to the private information of users that they sometimes share with third parties. For this reason, it is necessary to state that citizens authorize sharing their data.
The need to regulate the FinTech sector in Chile is increasingly evident. This need has even grown stronger since FinteChile submitted the draft open banking protocols to securities regulator CMF and the Ministry of Finance. This protocol seeks to stimulate the development of a national ecosystem, according to a note that BNamericas published last March.
At the time, Celedón stated that the FinTech bill could address issues such as open data. However, it was not possible to submit the proposal to Congress last year, since the social unrest that occurred in Chile led to its paralysis. The crisis that the coronavirus pandemic has caused in the world has also paralyzed the project this year.
As part of its growth, the FinTech industry expects integration with traditional banking in Chile. However, there is a story in which the bank has restricted the operations of several startups that provide financial services. Last January, Banco de Crédito e Inversiones (BCI) closed the accounts of the Bitcoin buying and selling platform ChileBit.
By Alexander Salazar
