Mexico enacts fintech secondary legislation
Mexico has promulgated the secondary legislation for its financial technology (fintech) law, which complements the law that came into effect in March, and which set out rules governing companies working with technologies such as cryptocurrencies, crowdfunding and peer-to-peer financial tools.
The secondary legislation, published in the Official Gazette, fills in gaps in the existing legislative framework and was drawn up during collaboration between the country’s financial sector regulator, the stock exchange commission (CNBV), the central bank, commercial banks and fintech firms.
As a result of the secondary legislation, fintechs will now be denominated as financial technology institutions, or IFTs, of which it is estimated there are around 200 now operating in the country.
The initial legislation, which was hailed as groundbreaking and is being studied by other countries for its possible adoption, includes guidelines for companies developing apps that use electronic payment methods, cryptocurrencies such as Bitcoin, and electronic financial advisory services.
According to Mexican law firm Von Wobeser y Sierra, the purpose of the fintech law is to promote inclusion, financial innovation and competition, while protecting and preserving financial stability by regulating limits for the reception of cash resources and the transfer of funds, accounting and disclosure of financial information, and the electronic record of risks that fintech companies must obtain from their clients.
The legislation also establishes the framework for preventing transactions with resources of unlawful origin and the financing of terrorism.
SInce the legislation came into effect in March, fintech start-ups have grouped together to form Fintech Mexico, an association representing the burgeoning industry and promote its growth both within the country and across Latin America.
The association has identified priority areas for development in Mexico, and which include payment platforms, e-commerce and international transfers, and the financial services infrastructure, which includes fraud prevention and cybersecurity, big data and analytics and cybersecurity.
It also aims to promote the development of digital credit, digital services for securities and currency trading, crowdfunding platforms, applied technology for insurance companies, and automated consulting and financial planning and education, blockchain-based solutions, and digital banks and asset markets, among other services.
CNBV director Bernardo González Rosas was quoted by state news agency Notimex as saying prior to the entry into effect of the secondary legislation that it would facilitate financing for small and medium-sized businesses, as well as providing collaborative ways of financing and investing through crowdfunding platforms, a capital-raising method that was previously unregulated in Mexico.
Mexico’s fintech law allows for three types of crowdfunding: debt financing, equity investments and profit sharing or royalties, the latter allowing investors to participate within joint venture structures. All crowdfunding activities must be carried out in Mexican pesos or in authorised cryptocurrencies. Donation and gift-based crowdfunding are not regulated by the law, and therefore do not require regulatory authorisation.
