Fintech Department Bulletin | Fintech Legal News in Argentina No. 20.
by Daniel Levi
The Central Bank regulates crowdlending platforms
A special registry is created and these entities become subject to the Financial Entities Law.
Through Communication “A” 7406 of November 25, 2021, the Central Bank of Argentina (“BCRA”) began to regulate the activity of “Providers of Credit Services between Private Persons through Platforms” (“PSCPP”), and created a special registry for such purposes. This new regime came into effect on January 3, 2022.
In this way, as already happened with other activities, the BCRA exercised its prerogatives under article 3 of Financial Entities Law 21,526 and extended the effects of this Law to the PSCPPs, only for the scope of the regulations specifically issued for the activity.
Let us remember that, until now, in Argentina only crowdfunding platforms for equity investments were regulated, by means of Law 27,349 and General Resolution 717/2017 of the National Securities Commission. However, crowdlending platforms (that is, for “loans” between peers) were exempt from said regulation.
This new regime also confirms a long-standing interpretive position, which held that simple “mediation” in credit (that is, the mere approximation of debtor and creditor) did not qualify as “financial intermediation” under the terms of the Financial Entities Law.
Regulation synthesis
The BCRA’s Communication defines PSCPPs as “those legal persons that offer, either as a main or accessory activity of their corporate purpose, the service of bringing together and putting in contact one or more credit providers, with their respective applicants, so to carry out loan operations in pesos through online platforms”.
PSCPPs will not be able to guarantee the repayment of credits, nor be bidders or borrowers on the platforms they administer. However, they may provide credit analysis, administration, and collection services. Investors must always assume the solvency risk, and must be able to directly assume or transfer the administration and collection of the loan at any time.
When PSCPPs provide credit analysis services, they must inform the source from which they obtain the information and the procedures implemented, following a series of methodological guidelines. In turn, they must periodically provide the BCRA with information on the rating of the debtors.
The movements of funds related to the operation must be made through bank accounts or payment accounts, and there must be a clear segregation with respect to the assets of the PSCPP (e.g., through the structuring of trusts).
Registration with the BCRA may be filed online and should work similarly to the existing process for the registration of Payment Service Providers. Existing platforms will have 30 days to request their registration once the process is enabled.
In all advertising material, PSCPPs must inform that they are not authorized to operate as financial entities and that they do not assume credit risk.
The PSCPPs, as well as the members of their governing, administrative and supervisory bodies, will be subject to the application of the sanctions provided for in the Financial Entities Law for non-compliance with these regulations.
Banks must hold in legal reserve 100% of the funds deposited in virtual accounts of PSPs
The funds will be deposited with the Central Bank.
Through Communication “A” 7429 issued on December 30, 2021, the BCRA established that financial entities must apply a minimum cash reserve ratio of 100% on the balances of bank accounts where the funds of virtual accounts of Payment Service Providers (PSPOCPs) are deposited.
Although in the past, through Communication “A” 6859 of January 2020, the BCRA had already established that 100% of the funds of the clients of the PSPOCP should be deposited in on-demand accounts in pesos in financial entities of the country, separated from the PSPOCP’s own funds, now the BCRA also indirectly prevents banks from using these funds for credit operations, by forcing them to reserve said balances with the BCRA.
The measure caused controversy in the fintech market, because the PSPOCPs were able to negotiate beneficial conditions with the banks to keep the funds deposited in their accounts, because of the profitability that the banks obtained by dumping those funds into credit activity.
The Argentine Chamber of Fintech openly spoke out against the measure in demonstrations to the press, warning that it could put at risk the offering of free products to users.
The BCRA, for its part, in a public statement, justified the measure on the need to protect users from the management of these funds.
There were also rumors saying that the measure could also have been due to the tightening of the monetary policy of the BCRA, which in recent days announced a general increase of interest rates for the financial system, in order to withdraw money from the market and combat inflation.
It is worth noting that this measure does not alter or restrict the possibility that PSPOCP users have to apply their balances to “money market funds”, as already authorized by the regulations.
Measures for the credit card market
The BCRA raised the revolving interest rate and restricted the possibility to pay travel expenses in installments.
Within the context of the increase of interest rates announced by the BCRA last January 6 for the whole financial system, through Communication “A” 7432, it was decided to raise at 49% p.a. the compensatory interest rate that issuers can charge to users of credit cards on the financed balances (the so-called “revolving”).
Let us remember that this cap applies only to “banking” issuers, on financed amounts that do not exceed AR$ 200,000, while for “non-banking” issuers the general cap of article 16 of Law 25,065 continues to apply (25% above the average rates of the financial system for unsecured personal loans). In the case of the so-called “Group C” banks, among which there are the main “digital banks”, the cap will apply until December 31, 2022, as established by Communication “A” 7427.
On the other hand, in another measure that generated quite a controversy, on November 25, through Communication “A” 7407, the BCRA established that financial institutions and non-banking issuers will not be able to finance purchases “in installments” with credit cards, for the purpose of paying cross-border plane tickets and other tourist services abroad (e.g., accommodation, car rental, etc.). The measure covers both purchases made either directly with the service provider or indirectly, through a travel and/or tourism agency, web platforms or other intermediaries.
In this way, this type of purchases can only be made from now on in a single payment.
First experiences of transfers 3.0
The BCRA was satisfied with the launch.
As originally planned, on November 29 the complete phase of the new instant-transfer system, known as “Transfers 3.0” was launched, through the implementation of the interoperability of payments with QR Code.
By means of a press release published on December 22, the BCRA reported that interoperable transactions with QR codes exceeded 50,000 per day, for the first time since its launch. In the first 23 days, a total of 786,276 operations were carried out for an amount of approx. AR$ 1,300 million.
A few days before the launch, the BCRA finalized some details of the system. Through Communication “A” 7409 of November 25, the BCRA established that, until March 1, 2022, the maximum settlement period may be increased from 15 to 25 seconds, for payments between different payment schemes. Likewise, among other things, a range between 0.6% and 0.8% was established for the capped-fee to be charged from merchants, and certain exceptions were established for the collection of fees lower than those indicated. It was also established that, until June 30, 2022, system administrators must submit to the BCRA a consensual plan for the implementation of a unified transactional repository that stores all operations.
On the other hand, due to certain frictions experienced in transfers between bank accounts (CBU) and payment accounts (CVU), it was rumored that the BCRA had to send certain letters to local banking associations reminding them that they must allow such transfers to be carried out immediately without limitations, applying only the daily limit established by the regulations of 15,000 UVAs (currently equivalent to AR $ 1,257,000).
New investigation against crypto companies that remunerate users
Second warning in less than a year.
On December 20, 2021, the BCRA issued a press release, where it warned that it will begin to investigate companies that operate with crypto assets and that offer their users extraordinary returns that are not compatible with reasonable parameters in financial operations.
In this regard, the BCRA stated that: “Advertising campaigns were detected in some provinces, such as La Rioja and Catamarca, aimed at attracting investors with not very transparent asset management schemes.”
The BCRA reported that it ordered these companies (whose names were not disclosed) to stop carrying out “financial intermediation” operations, and that it is analyzing whether to file a criminal complaint for the presumption of a fraud maneuver assimilated to “Ponzi schemes”.
This warning from the BCRA is added to a similar statement made on June 11, 2021, where it also warned that investigations had been initiated against 9 companies in the crypto market for alleged irregular financial intermediation.
In the last year there has been a growing proactivity of the Argentine authorities regarding the investigation of illicit activities around the crypto world, including the confirmation of the first conviction for money laundering through the use of cryptoassets, in the famous “White Coils” case, by the end of 2021.
Requirement of information and bill of law on crypto mining
The Government seeks to identify the amount of electrical energy consumed.
The Undersecretariat of Electric Energy instructed the Management Company of the Electric Wholesale Market (CAMMESA) to request from the country’s distributors information on the consumption of companies dedicated to mining of cryptocurrencies in their areas of operation.
This was revealed in journalistic information at the end of 2021, where a copy of the letters sent by CAMMESA was attached.
These letters specify that the consumption value to be declared is that corresponding to the set of servers, cooling system and consumption associated with the mining activity, both for the years 2020, 2021 and expected for 2022 and 2023. It also requires identifying the Tax Id. number and the corresponding Classifier of Economic Activities (CLAE) of each mining company, all of which must be reported within a maximum of 15 business days after receipt of the corresponding request.
This requirement emerges in moments where, at the same time, by the end of 2021 a bill of law was submitted in Congress by the opposition for the promotion of crypto mining activities in the country.
More provinces levy crypto activities with Turnover Tax
Three provinces expressly regulate them.
By the end of 2021, the provinces of Tucuman (Law 9421) and La Pampa (Law 3402) regulated the taxability of this type of activity for the Turnover Tax.
This way, the two provinces follow the path of the province of Córdoba, which had recently included these activities in the same tax under section 202(j) of its Fiscal Code.
The BCRA publishes a new report on non-banking lending activity
The report reveals the growth of the industry in the last year.
On December 27, 2021, the BCRA published a report on Other Non-Financial Credit Providers (which includes several fintech credit companies) that reveals that the global amount of financing granted by these companies rose 17% more than the previous year .
Among other news, a significant increase in this type of companies was also revealed, which in August 2021 reached a total of 357 (41 from the fintech sector), with a net increase of 34 companies compared to January 2021 (with 19 of these new companies corresponding to the fintech industry).
The report also revealed a 15% decrease in delinquency, although, as expected, interest rates remain higher than personal loan rates of the financial system. On the other hand, it was observed that women, despite having less access to bank accounts, have less default in payment than men.
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