Last week Mexican Financial Regulators: the Commission
for the Protection and Defense of Financial Services Users (CONDUSEF), the National
Commission System for Retirement Savings (CONSAR) published the draft Bill to Regulate the Institutions
of Financial Technology, better known as the “Fintech Law”.
The Fintech Law will regulate the creation and
operation of the Financial Technology Institutions (ITF).
Under the Fintech Law, all the new ITFs will carry out
activities and operations where technology is fundamental by easing and making money-related
transactions more straightforward, beyond creating the platform to exchange
products and services by means of virtual assets.
Under the preliminary Fintech Law draft bill, there
are three types of ITFs:
a) Crowdfunding Institutions, which will provide
access to sources of financing to markets that are not served by the financial
ecosystem, thus generating greater financial inclusion at reasonable costs;
b) Institutions of Electronic Payment Funds, which
will help to make efficient the exchange of products and services,
strengthening the economy of the country. In both cases the possibility exists
that the operations carried out are carried out in national currency, foreign
currency or in virtual assets; always following the guidelines set by the Mexican
Central Bank (Banxico) and other financial regulators, including all the
relevant requirements under AML rules; and
c) Virtual Asset Management Institutions: These contact
third parties through digital means in order to buy, sell or dispose of their
own or third party’s virtual assets, and receive virtual assets to make transfers
or payments to any person, including another Virtual Asset Management
Institution. Under the Fintech Law, virtual assets are those digital units that
have similar uses to those of the Mexican peso, as determined by Banxico under
certain criteria it will take into consideration.
Furthermore, another Fintech Law’s highlight is its
contribution towards the possibility of carrying out operations under new
business models, such as big data, crowdfunding, cryptocurrency, e-money,
regulatory sandboxes, robo-advisory and application programming interface (API).
If the Law comes into force as under the draft’s form, ITFs will have to be incorporated as a Mexican corporation (sociedad anónima de capital variable) or
limited liability company (sociedad de
responsabilidad limitada de capital
variable) in order to render services in Mexico. This means, for foreign
financial services providers, the need to incorporate a subsidiary in Mexico versus rendering services from a branch
or any other type permanent establishment.
All ITFs will have to obtain prior authorization from
the Securities Commission (CNBV), together with an opinion from the Committee
on Financial Technology Institutions (as proposed by the Fintech Law).
Those ITFs which are already providing services in
Mexico will have to obtain the CNBV’s authorization in order to continue
operating as such.
In this sense, in order to be authorized as ITFs,
companies must certify to the CNBV that:
- · the transactions they wish to carry out are expressly foreseen within their bylaws;
- · they have the appropriate governing bodies and corporate structure to carry out their operations; and
- · they have the necessary infrastructure and internal controls such as operating, accounting and security systems, offices, as well as the respective manuals.
The CNBV will publish the authorizations it grants on
a public registry and on the CNBV’s website.
The next steps are that the finance and banking
community should provide its feedback on the initiative; then the draft bill
will be revised introduced to Congress whom, will make any adjustments and if
passed, the bill will be enacted.
