The fintech sector in Chile has experienced rapid growth in recent years. According to the Fintech Radar report, published by Finnovista in October 2023, this market has grown at an average annual rate of 29.5% since 2019.

Currently, there are 300 fintech startups in the country, along with 78 foreign companies, totaling 378 ventures. Within this industry, the payments segment stands out as the most significant, accounting for 20.5% of the offerings, followed by corporate finance management (17.3%) and loans (14%).

The Fintech Law in Chile is driving the growth of the sector, positioning the country as a financial innovation hub in Latin America.

Un nuevo marco regulatorio El 2023 marcó un hito en la regulación del sector fintech en Chile con la publicación de la Ley Fintech en enero de ese año. This law establishes the first formal legal framework for the industry and grants the Financial Market Commission (CMF) oversight of the financial services included within it. These services include:

• Investment advisory
• Credit advisory
• Crowdfunding platforms
• Alternative transaction systems
• Order routing
• Financial instrument intermediation
• Custody of financial instruments

Additionally, the Fintech Law introduces the regulation of crypto-assets and other virtual financial assets, covering their transaction, custody, and intermediation under the supervision of the CMF. A Flexible Regulatory Scheme

The framework of the Fintech Law is based on establishing general requirements and operational principles in the law, while the specific regulation for obtaining licenses and authorizations is left to the CMF through administrative rules. This approach allows for greater flexibility and dynamism in regulation, avoiding the need for legislative reforms to adapt the regulations to changes in the industry.

Although the law was published in January 2023, its effective implementation is subject to a system of deferred validity. This means that the registration and authorization application requirements to offer regulated services will not come into effect until the CMF issues the specific regulations, which was expected to occur within 18 months following the publication of the law. In compliance with this deadline, on January 12, 2024, the CMF published General Rule (NCG) No. 502, establishing the registration requirements for fintech entities.

Registration and Authorization of Fintech Entities

The CMF regulations require that regulated entities apply for their registration in the Financial Service Providers Registry. However, mere registration is not sufficient to offer services to the public; it is also necessary to obtain a specific authorization for each service. NCG 502 introduces a key element: foreign institutions offering fintech services to residents in Chile will also be subject to regulation. These entities must establish an agency in Chile, unless they only offer certain services to qualified investors, in which case they may be exempt from this requirement. Entities currently providing regulated services have a period of 12 months, until February 3, 2025, to register, with the exception of investment advisors, who must do so before February 3, 2024. The Open Finance System

Another important aspect of the Fintech Law is the creation of an Open Finance System, established in Title III. This system will allow for the exchange of customer information between different financial service providers through automated interfaces and remote access. The implementation of this system is pending the issuance of specific regulations by the CMF, which should be published no later than June 4, 2024.

The Fintech Law represents a significant advance in the regulation of the financial sector in Chile, providing a clear and flexible legal framework for the industry. With its implementation, Chile is expected to continue solidifying its position as a hub for financial innovation in Latin America, attracting more startups and foreign companies to the country’s fintech ecosystem.