The Organic Law for the Development, Regulation, and Control of Financial Technology Services, also known as the Fintech Law (the Law), came into effect on December 22, 2022 through its publication in the second supplement of the Official Register No. 215. Its main objective is to provide legal security to financial technology companies operating in the country, promote foreign investment, and provide users with secure access to services that protect their data. The Law also includes new members to the payment system, the private financial system, the securities market, and the private insurance system. Additionally:
- It establishes that regulatory and control bodies must identify and prevent risks of each service;
- It grants wide powers to regulatory and control bodies so that they can fulfill their responsibilities adequately;
- It includes regulatory Sandboxes ("Test Environments") that allow continuous monitoring of a technology project, which will allow for greater precision when regulating certain activities in the sector.
Further, the Law reforms the Monetary and Financial Organic
Code, the Organic Law of Enterprises and Innovation, the General
Insurance Law, and the Securities Market Law.
The Law regulates activities related to the development, provision,
use, or offering of payment means based on technology, financial
technology services, specialized companies in electronic deposits
and payments, technological services in the securities market, and
insurance. Accordingly, financial technology companies must meet
the following requirements:
- Authorization from the Superintendency of Banks, Popular and Solidarity Economy, or the Central Bank, as appropriate;
- Specific and exclusive object for Fintech activities;
- Registration as ecuadorian companies or branches of foreign companies;
- Be subject to a territorial application of the Law, i.e., when they operate anywhere in Ecuador;
- Respect the prohibition on investment by private financial entities, since these cannot participate in the capital of Fintech companies.
Furthermore, Fintech companies will be regulated in their
operations by the Monetary Policy and Regulation Board and
Financial Policy and Regulation Board, according to their
competencies, and will be supervised and controlled in the
corporate area by the Central Bank of Ecuador, the Superintendency
of Companies, Securities, and Insurance, the Superintendency of
Banks, or the Superintendency of Popular and Solidarity Economy,
according to their competencies. Further, the determination of
which financial activities based on technology represent a high
risk will correspond to the Financial Policy and Regulation
Board.
Consequently, the Law establishes responsibilities and sanctions
for Fintech companies, as well as protection measures for the users
of their services. It also provides a system for the registration
and supervision of Fintech activities, and for the creation of a
Fintech Association for the regulation and promotion of the
sector.
Finally, the Law provides for the possibility of obtaining
resources through various mechanisms, (venture capital, angel,
seed), ratifies the validity of credit titles issued in electronic
support and establishes the obligation of the State to maintain
citizen data stored in Ecuadorian territory.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
