{"id":9540,"date":"2021-07-26T08:32:37","date_gmt":"2021-07-26T08:32:37","guid":{"rendered":"https:\/\/central-law.com\/?p=9540"},"modified":"2021-07-26T08:32:37","modified_gmt":"2021-07-26T08:32:37","slug":"el-salvador-how-fintech-regulation-can-build-healthy-growth-in-el-salvador","status":"publish","type":"post","link":"https:\/\/central-law.com\/en\/el-salvador-how-fintech-regulation-can-build-healthy-growth-in-el-salvador\/","title":{"rendered":"EL SALVADOR – How Fintech Regulation Can Build Healthy Growth in El Salvador"},"content":{"rendered":"

Though El Salvador only recently hit headlines with its\u00a0adoption of Bitcoin<\/a>, it has had regulations that provide guidelines on the digitisation of financial services and fintech since 2015. The guidelines intend to incorporate as many users as possible and to push the banking sector forward.\u00a0<\/span><\/p>\n

The guidelines have two primary aims. The first, to\u00a0<\/span>integrate the unbanked section of the population into a more accessible financial system, is widely accepted at the international level and allows more people to creditworthy and enjoy a subsequent improval in their quality of life. The second is to establish\u00a0additional guidelines regarding\u00a0cryptocurrencies and the minimum requirements to be met by companies interested in participating as suppliers within the financial system.<\/p>\n

Fintech for the Unbanked<\/h3>\n

While the\u00a0<\/span>\u201cLaw\u00a0to Facilitate Financial Inclusion\u201d\u00a0and its additional\u00a0implementing\u00a0regulations dictated by the Superintendent for the Financial System, mark an important step in supporting the unbanked population, expanding e-money systems and providing additional regulation for fintech, it is necessary for this regulation to cover more areas in order to create new business opportunities in a healthy, orderly way for users.<\/p>\n

The guidelines can integrate the unbanked section of the population into a more accessible financial system<\/strong><\/p><\/blockquote>\n

Why?\u00a0Because fintechs are\u00a0much more than a product\u00a0or traditional \u201cbanking\u201d service provider<\/a>.\u00a0Fintechs also provide B2B services and, importantly, cheaper\u00a0transactions through multiple platforms. They could be\u00a0used to\u00a0develop safer transactions by establishing minimum requirements on, for\u00a0example,\u00a0data encryption\u00a0(even through Blockchain) and\u00a0\u00a0<\/span>by integration into the existing digital regulation (the \u201cElectronic Signature Act and Electronic Commerce Act\u201d).\u00a0To do this, we believe it would be\u00a0valuable to\u00a0develop\u00a0broader regulation covering more general aspects of\u00a0the industry while taking care\u00a0to\u00a0avoid falling into overregulation, which\u00a0in practice\u00a0will make technological developments\u00a0impossible.<\/p>\n

Some\u00a0examples\u00a0of\u00a0this could be\u00a0to support or encourage\u00a0making transactions with existing cryptocurrencies, like Bitcoin, greater regulation of capital raising mechanisms (such as\u00a0Crowdfunding<\/a>)\u00a0as an alternative way of financing,\u00a0and even the creation of\u00a0regulatory\u00a0sandboxes\u00a0as temporary spaces to\u00a0carry\u00a0out pilot tests of new regulation to measure its advantages,\u00a0disadvantages\u00a0and\u00a0inconveniences\u00a0in a defined space\u00a0where its effects are controlled,\u00a0before moving into use within the general application.<\/p>\n

Examples to Work From<\/h3>\n

Examples of this are already in play in other areas of Latin America. Mexico\u2019s\u00a0\u201cLaw to\u00a0Regulate Financial Technology Institutions\u201d, popularly known as the\u00a0Fintech Law<\/a>, addresses these and other aspects related to financial regulation. These including the handling of information flowing through fintech services and its classification\u00a0 as \u201copen data\u201d (data that does not contain confidential information), \u201caggregate\u00a0 data\u201d (statistical information of transactions at a group level, without the ability to identify individuals) and \u201ctransactional data\u201d (related to the use of a product or service). These supplementary regulations are\u00a0 accompanied by authorisation stages in which users must grant permission for their data to be shared.<\/p>\n

The relevance of these types of change would allow El Salvador to\u00a0put itself on the global map<\/a>\u00a0for progressive technology use and, very importantly, facilitate\u00a0the participation of more\u00a0 financial\u00a0actors to provide\u00a0a greater array of products and services<\/a>\u00a0to sections of society who have historically not had access to\u00a0banking.\u00a0<\/span><\/p>\n

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We consider El Salvador to have two key factors for the successful adoption of cryptocurrencies. The first is that nearly a quarter of the Salvadoran population receives remittances that are currently expensive to send. The cost of this vital financial source could be be significantly reduced with the implementation of cryptocurrencies as legal tender, allowing\u00a0payments\u00a0to go through\u00a0digital wallets\u00a0instead of sending remittances via financial institutions.<\/p>\n

Secondly, experiments of this type of economic dynamics have been carried out in\u00a0Playa El Zonte<\/a>, where its residents have made a gradual transition of their economy to cryptocurrency. This move has been viable when the population is duly informed regarding the use of said financial assets.<\/p>\n

We consider that this is a good time to broadly analyze the phenomenon of fintech and take the opportunity to generate a regulation that not only covers points already contemplated in other countries, but also establishes the most advanced policies possible for the healthy growth and development of this industry in our country.<\/p>\n

Fernando Argumedo<\/p>\n

CENTRAL LAW in El Salvador<\/p>\n

This article was published by Nearshore Americas: https:\/\/nearshoreamericas.com\/fintech-regulation-el-salvador-bitcoin\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Though El Salvador only recently hit headlines with its\u00a0adoption of Bitcoin, it has had regulations that provide guidelines on the digitisation of financial services and fintech since 2015. The guidelines intend to incorporate as many users as possible and to push the banking sector forward.\u00a0 The guidelines have two primary aims. The first, to\u00a0integrate the 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