Government proposes laws to regulate fintech entities and crowdfunding

this Minister of Economy, Maria Luisa Hayemrequesting the Legislative Council to approve Law on the Promotion of Fintech Entities and Regulation of Digital Financial Services Regulate businesses related to digital payments, crowdfunding or lending platforms.

The project was submitted to the Legislature by the executive branch on Monday, proposing a five-year exemption Income Tax for”Fintech Entities”, which was formulated after the law came into effect.

“Fintech entities” must be authorized by regulators Financial System Supervision Authority (SSF) Only those businesses that provide payment services on digital platforms must be authorized by the regulator Bank of Central Reserve (BCR)When requesting authorization, they will detail the shareholders, organizational chart, and money laundering and asset laundering compliance manuals, among other things.

As far as I know, digital financial services are not strictly regulated due to their novelty. I think it is very important to bring them under the supervision of the SSF.
Carlos Acevedo, President of BCR.

Twelve Months Legalization

Russ Fintech Entities Once the technical standards are published, businesses that already provide digital services such as payments, alternative financing or crowdfunding will have 12 months to implement them. Becoming a FinTech EntityOnce passed, the law will prohibit the unauthorized provision of services.

However, according to the project, BCR will have 90 days to publish technical standards.

This regulation will grant 60 days The same period may be extended to submit a “Adaptation Plan“If you do not show it, you will not be able to continue to provide services.

The law will establish a Financial Innovation Committee (CIF) to improve the public’s digital financial knowledge in areas such as digital identity, data privacy, and cybersecurity; and an Office of Financial Innovation (OIF), composed of technical personnel from the SSF and BCR, which will have a repository of authorized fintech entities. CIF and OIF have up to 90 days to establish their status.

Raising funds through crowdfunding

For alternative financing orCrowdfunding”, the project Will legalize these fundraising activities provided that they are carried out in accordance with the above provisions. In these cases, the FinTech entity They must publish crowdfunding regulations Including admission criteria, program features and financial conditions.

According to the project, the funds raised are Crowdfunding They may not be used to merge with or acquire the shares or credit of other companies.

Russ Fintech Entities They should not directly advise on productive projects financed through physical crowdfunding.

Report by the Inter-American Development Bank (IDB) Registration El Salvador has 27 fintech companies or fintech models, an increase of 93% from the 14 reported in 2022.

Summary of the Fintech Act

• Fintech Entities: Companies that design, develop or manage digital financial products or services through the use of technology.
• Regulation: Digital payment platforms, crowdfunding and digital platform lending.
• Authorization: lPayment entities on digital platforms must request authorization from BCR and deposit 100% of their digital record balance in USD into BCR’s non-repayable deposit account. The remainder must be authorized from the SSF.
• Exemptions: The law will grant a five-year income tax exemption only to new fintech entities or those established less than five years ago once they are authorized.