Chile’s Fintech Act: A Gateway to Latin American Online Trading

Latin America has long been a lucrative market for industries like online trading and gaming. However, the regulatory landscape for online trading of FX and CFDs in the region has been characterized by either highly complex regulation, or a complete lack thereof.

This has led to an unusual situation where many leading brands operating in Latin America are not licensed or regulated within the region.

Chile’s Fintech Act: A New Regulatory Framework

The introduction of Chile’s Fintech Act marks a significant shift in this landscape. This new regulatory framework has the potential to become a gateway to the Latin American market for online trading businesses.

The Fintech License

A Fintech Licensed Company is regulated and supervised by the Chilean Financial Market Commission (CMF). The Fintech Act establishes a regulatory framework for various Fintech services, including alternative trading systems, credit and investment advice, custody of financial instruments, order routers, and financial instrument intermediaries.   

Key Definitions

The Fintech Act defines key terms such as:

• Alternative Trading Systems: Platforms for quoting, offering, or trading securities or financial instruments, including crypto-assets.
• Brokerage of Financial Instruments: Buying or selling financial instruments on behalf of third parties.
• Custody of Financial Instruments: Holding financial instruments, money, or foreign currency for clients.
• Financial Instrument: Securities, contracts, documents, or incorporeal goods designed to generate monetary income, represent a debt, or are crypto-assets.

CFD Trading Under the Fintech Act

Based on these definitions, acting as an intermediary and offering CFDs falls within the scope of the Fintech Act and is therefore regulated by the CMF.

Authorization Process

The regulatory process for operating an alternative trading system in Chile involves two phases:

1. Registration: Incorporating a local company and registering it with the Registry of Financial Service Providers.
2. Authorization: Applying for authorization to operate as an alternative trading system.

The registration phase allows companies to start their activities while their authorization application is under review.

Key Obligations for Fintech Providers

Fintech providers must comply with various obligations, including:

• Information Duties: Providing both clients and the public with required information.
• Suitability and Knowledge: Ensuring individuals providing credit counseling or investment advice have the necessary qualifications and systems in place.
• Guarantees: Providing guarantees for client protection and damage compensation.
• Minimum Equity: Maintaining a minimum capital requirement based on business volume and customer numbers.
• Corporate Governance and Risk Management: Adhering to established standards for corporate governance, risk management, and cybersecurity.
• Local Presence: Appointing a local legal representative in Chile.
• Reporting: Complying with periodic reporting requirements to the CMF.

Timelines for Application and Licensing

The typical timeline for obtaining a Fintech license in Chile is 4-7 months, including preparation, registration, and authorization.

Comparison to Other Jurisdictions

Chile’s Fintech Act offers several advantages over other jurisdictions, including:

• Reduced Physical Presence: No requirement for a local office or employees.
• Lower Capital Requirements: Compared to offshore jurisdictions and many onshore jurisdictions.
• No Trading Limitations: Unlike some other jurisdictions, Chile does not impose restrictions on trading activities.

Conclusion

Chile’s Fintech Act provides a robust regulatory framework for Fintech providers, including those offering CFD trading services. Its favorable regulatory environment, coupled with its political and economic stability, makes Chile an attractive option for businesses seeking to enter the Latin American market.

Written by David Woliner, Adv. 
Head of Financial Regulation.

Contact Porat Group for more information on how to proceed if you are interested in this framework for your business.