Benefits of the New Fintech Law for Cryptocurrency Users in Chile

Quite a lot of water has flowed under the bridge in the crypto world in Chile, since in 2018 the legal mess between the platforms for buying and selling digital assets and banks began, until today, with a market approaching half a million users.

A few days ago, another milestone was added, perhaps one of the most important: the Fintech Law was approved by the Chamber of Deputies by a large majority in its last procedure, making it ready to be enacted by President Boric, a document that also establishes the legality and regulation of both crypto platforms, as well as crypto assets. The question is: does it change anything for users?

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Financial backing

“In general, both for users and companies, the future enactment of the law is great news. First, those who have cryptocurrencies will be safer when it comes to going to a platform, while on the side of startups and exchanges, there will be greater certainty and clear regulatory frameworks to operate,” says Joel Vainstein, co-founder and Chief Growth Officer of Orionx.

First of all, platforms must be approved and regulated by the Financial Market Commission (CMF). This step obliges the platforms to provide guarantees on four important aspects: 1. to be responsible with the information they offer to individuals, 2. to demonstrate operational capacity to support the transactions carried out on it, 3. to have internal protocols for responding to users, and 4. to have corporate governance for risk management.

“While there are not many, there have been very bullish cases of crypto platforms that in the face of crises have blocked user transactions or frozen money. This is a real concern. However, when the new law comes into force, any company recognized by the CMF will have to demonstrate a financial back that will allow it, in case of any crisis, to be able to respond with the restitution of the investment to its clients. This is a tremendous guarantee,” emphasized the Orionx executive

Prosecution of crimes

Another key point is the increased security within the crypto ecosystem itself. When the law comes into force, the platforms will have the obligation to alert the Financial Analysis Unit (UAF) about suspicious operations of fraud, scams, money laundering, and financing for illicit activities, as well as the agency, will be able to issue instructions to the same companies to combat them.

“Currently there are services of companies that perform data analysis in blockchain, such as Chainalysis, to detect and stop illicit or suspicious activities, allowing to stop transactions, and thus prevent money from reaching known illicit entities or users from falling into scams. They are a kind of ‘blacklist’ and automated systems for detecting irregular movements, very useful, which we already have and will have to be a standard in the near future,” said Vainstein.

New products

Finally, regarding new products, the Orionx executive said that “this new clear legal framework to operate will favor the emergence of new use cases and services for people, since at least in legal terms, it matches crypto platforms with banks and other financial institutions.”

That is, new products such as mutual funds, loans, credit cards, stocks, or blockchain-based securities will be more likely to appear, as the spirit of the law protects fintech companies more against banks against past measures such as account closure. Instead, there will be greater confidence to establish alliances between fintech companies themselves and card brands, increasing competition and favoring user-facing product offerings.

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(Featured image by sergeitokmakov via Pixabay)

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First published in DIARIOESTRATEGIA, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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