I. Background.-

Through the session of October 30, 2022, the Plenary of the National Assembly approved the  Organic Law Project for the Development, Regulation and Control of Technological Financial Services  (hereinafter “ Fintech Law “).

Fintech  Law  reforms the Organic Monetary and Financial Code, the Organic Law of Entrepreneurship and Innovation and the Organic Code of the Social Knowledge Economy.

II. Fintech Law.-

Object and purpose of the Fintech Law:  regulate Fintech activities carried out based on technology related to the financial, securities and insurance markets, with the aim of promoting innovation and the development of new technologies to improve financial inclusion.

Fintech Activities:  the law will apply to the development, provision, use and offer of Fintech activities, understood as:  (i)  means of payment focused on technology; (ii)  technological financial services; (iii)  specialized electronic deposit and payment companies; (iv)  technology services for the stock market; and,  (v)  technological insurance services.  

Requirements to carry out Fintech activities: (i)  be constituted as public limited companies and be authorized by the corresponding control bodies; and,  (ii)  count as a specific and exclusive corporate purpose the performance of Fintech activities.

Means of payment : the  Fintech Law  adds among the means of payment to electronic wallets with the category of fully digital banking and other means of payment focused on technology; and, provides that the electronic means of payment will be operated by the entities of the national financial system and the qualified agents of the auxiliary payment system.

Financial System:  Two categories are added to the entities of the private financial system:  (a)  technological financial services, which are entities that can carry out financial activities focused on technology such as:  (i)  digital credit granting,  (ii)  neobanks,  ( iii)  personal finance and financial advice; and,  (b)  specialized electronic deposit and payment companies.

Stock Market:  Added to the technological services entities for the stock market, which are those that develop activities focused on technology such as: (i  )  Auxiliary transaction systems; (ii)  Infrastructure for the stock market; (iii)  collective financing or digital crowdfunding; (iv)  blockchain; and,  (v)  others determined by the Monetary and Financial Policy Board.

Insurance System:  Insurance technology service entities are added as a member of the private insurance system, whose activities may be:  (i)  alternative transaction systems; (ii)  infrastructure for the insurance system; (iii)  blockchain; and,  (iv)  others determined by the Monetary and Financial Policy Board.

The  Fintech Law  prohibits private financial entities from participating in the capital of Fintech companies.

Regulatory test environment ( Sandbox ):  a regulatory test environment is implemented  (Sandbox)  is implemented for new business models related to technological services for the financial system, the stock market, and the insurance system that are not yet regulated.

The Superintendency of Banks and the Superintendency of Companies, Securities and Insurance will be empowered to create regulatory test environments.

III. Other relevant provisions.-

The validity of all credit titles issued with electronic support is recognized as long as they comply with the provisions of the Commercial Code and the Electronic Commerce Law, Signatures and Data Messages.

Finally, the  Fintech Law  establishes that reserved and confidential data classified in this way for security reasons must be hosted in Ecuadorian territory.

Daniel Castelo  | Senior Associate Bustamante Fabara | dcastelo@bustamantefabara.com