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Contxto – The government in Buenos Aires is pulling in the reins for fintechs in Argentina. Specifically, it’s instructed these startups to place their user’s money in traditional banks so it may be under constant supervision by the corresponding supervising body.
This regulation has a three-pronged purpose. First, it wants to protect users by supervising that startups don’t mishandle a person’s funds. Second, it mitigates tax evasions. And third, it (supposedly) ensures a level playing-field between banking institutions and fintechs.
Argentina’s Central Bank released the instruction on January 9 and unless there are changes, fintechs have until the end of this month to comply.
Related article: In Argentina, startups scramble to adjust to new dollar tax
It could’ve been worse…
But that’s only because earlier it was believed authorities were going to prohibit transactions between e-wallets altogether. And that would’ve been a direct hit for them.
Where is this regulation coming from?
Buenos Aires flagged down these financial startups after a series of reports emerged. In them, it was believed that there were fintechs taking users’ money out from their digital savings account. The fintechs would supposedly use these funds to make investments without the account holder’s knowledge.
In addition, the government was aware that many businesses and people alike used e-wallet-to-e-wallet transfers so as to avoid being taxed.
Weighing their options, authorities ultimately went with a middle-ground approach and didn’t clip fintechs’ wings entirely. And that’s because if the government truly wants a more cashfree Argentina, killing the fintech mojo probably wouldn’t have helped.
Cheater, cheater, pumpkin eater
As for Buenos Aires’ third argument of unfair competition between traditional banks versus fintechs. It’s striking.
Since when does Goliath complain about David playing unfairly?
Well, I guess they do hate how Mercado Pago is dogging at their heels and so they’ve called for some divine government intervention.
Wanna hear more? We recommend you listen to the following podcast episode: Cambio de reglas para las fintech argentinas y el llamado al estrellato de Notco. You can find the time stamp available in the description.