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.
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