Fintech in Argentina

Introduction

Argentina has positioned itself as a prominent hub for fintech evolution in the Latin American (LATAM) region. With a growing number of firms and a thriving technological landscape, the country has outpaced many of its neighbors and even caught up with several European nations. However, amidst economic instability and a challenging legislative environment, understanding the rules surrounding fintech, cryptocurrencies, and payment systems becomes crucial. In this article, we will explore the fintech landscape and crypto regulation in Argentina, diving into the controlling structure, licensing process, and opportunities for innovation.

Regulatory Landscape

Argentina differs from the United States in terms of its approach to Money Transmitter Licenses (MTLs). While the US has a state-by-state licensing system, Argentina has adopted a centralized approach, with the Central Bank of Argentina (BCRA) serving as the sole agency, giving MTLs. As the federal system controlling the national banking and remittance systems, the BCRA plays a pivotal role in shaping the fintech field.

Understanding the Payment System

To comprehend the intricacies of fintech rules, it is essential to grasp the payment system landscape in Argentina. The BCRA established the National Payment System (SNP), which encompasses payment instruments, procedures, and methods facilitating the circulation of money within the country. Funds transfers, a key component of the SNP, allow for both commercial and non-commercial transactions, supporting payment methods and personal sendings.

Types of Licenses

Payment Service Providers (PSPs) operating within the remittance scheme in Argentina have specific roles and corresponding licenses. PSPs can serve as payment account providers, initiators, ATM funds transfer managers, or electronic fund transfer intermediaries. To operate legally, PSPs must register with the BCRA under the Registry of PSPs. Additionally, the BCRA has introduced two specialized licenses for certain roles: the Proveedor de servicios de pagos que ofrece cuentas de pago (PSPCP) license for payment account providers and the PSP que cumplen la función de iniciación (PSI) license for initiators.The MSB license (Money Transmitter License) allows firms to legally supply options related to funds transfers and other payment actions. The MSB license in Argentina is issued by the BCRA and is necessary for fintech firms that engage in money transmission or payment services. 

Registration Requirements for Fintech Companies in Argentina

To register as a Payment Service Provider (PSP) in Argentina and obtain the necessary licenses from the Central Bank of Argentina (BCRA), firms must fulfill certain requirements. The enrollment process involves complying with specific criteria and providing essential data. Here are the registration demands for fintech firms in Argentina:

• Legal Entity: The company must be a legally recognized entity incorporated in Argentina or a foreign company with a subsidiary registered in the country.
• User ID: Before initiating the registration process with the BCRA, the company must obtain a User ID from the Argentinian Tax Authority (AFIP). This ID serves as a unique identifier for the company in its interactions with government agencies.
• Commerce Operations: Companies must supply comprehensive data about their commerce operations. This includes details regarding the nature of the fintech options  they offer, the target market, and the overall commerce model.
• Bylaws: Firms are required to submit general data about their bylaws, which outlines the internal governance structure and operational framework of the organization.
• Designated Responsible Employees: The company must designate employees who will act as responsible individuals in their interactions with the BCRA. These employees will be the main point of contact and will handle any communication or compliance-related matters.
• Monetary Information: Companies may be required to provide monetary statements or demonstrate monetary stability to ensure their capacity to operate as a PSP.
• Data Safety: Fintech firms must demonstrate conformity with data protection and security standards to safeguard customer data and remittances.

It is important to note that the BCRA may request additional documentation or information during the registration process, depending on the specific circumstances of each firm. The registration demands aim to ensure transparency, stability, and conformity with the administrative framework governing the fintech sector in Argentina.

Once the registration is complete and all demands are met, firms can proceed with the licensing process and apply for the appropriate licenses based on their role within the payment scheme, such as payment account provider or initiator.

Restrictions and Prohibitions

Certain restrictions apply to PSP licenses in Argentina. Currently, only companies incorporated in Argentina or foreign companies with local subsidiaries are eligible to apply. Notably, no foreign firms currently hold PSP licenses in Argentina. Furthermore, PSPs are prohibited from lending user funds, and all funds must be fully deposited in a bank’s sight account. PSPs can only offer accounts denominated in Argentine pesos, and they, along with banks and monetary entities, cannot charge fees for remittances between end users or accounts held by the same individual. As of May 2023, PSPs are also prohibited from offering products or services related to virtual assets or cryptocurrencies. However, some local players have navigated this restriction by separating their crypto and fiat operations into distinct entities.

Innovations

Despite the administrative challenges, the monetary field in Argentina offers immense potential for innovation. By complying with the BCRA’s regulations and licensing demands, firms can establish themselves in a market ripe for disruption. Fintech solutions, particularly in areas such as mobile transfers, remittances, and digital wallets, can address the country’s economic complexities and contribute to monetary inclusion.

Conclusion

As Argentina continues to solidify its position as a leading fintech hub in LATAM, understanding the administrative framework is crucial for fintech firms aiming to operate within the country. By navigating the licensing process, adhering to rules, and capitalizing on opportunities for innovation, fintech ventures can contribute to the growth and development of Argentina’s vibrant fintech ecosystem.