The CNV Launches the Innovation and Financial Inclusion HUB and Announces the FinTech Roundtable Working Groups

Last April 13th, 2022, the Argentine Securities Commission (the "CNV", after its acronym in Spanish), through a virtual event led by Adrián Cosentino (Chairman), Martín Breilinger (Director) and Ricardo Lazzari (Deputy Manager of Investor Protection and Financial Education) announced the launch of an initiative driven by the agency's FinTech Roundtable : the HUB for Innovation and Financial Inclusion (the "HUB"). Subsequently, on Monday, April 18th, General Resolution No. 926 (the "Resolution") was published, which formalized and regulated this proposal.

The HUB will be a space that will serve as a collaborative, open and informal communication channel between innovators, i.e., entities that have innovative technology-based financial projects or products that carry out their business, not exclusively, in the country, and the capital market regulator (the CNV),  to provide support, assistance and guidelines to participants on how to manage and operate within the regulatory framework. Furthermore, the HUB is also intended to be an initiative for the CNV to learn about new business models and technological trends, and to receive contributions or suggestions on how to foster innovation through new regulations or amendments to existing ones.

The first contact between innovators and the regulator will be made through a special section of the CNV´s website, where applicants may present projects through a specific form (the "Applicants"), and in case they are qualified and endorsed by such space therefore considered  “eligible” (according to the eligibility criteria established), they will become participants of the HUB (the "Participants"). 

According to Article 4 of the Resolution, to be considered eligible, the Applicants must meet the following requirements:

• Innovation: Demonstrate it is a business model that uses new or emerging technologies and/or existing technologies that introduce changes in the implementation of the regulated entities' typical activities.

• Utility or added value: Demonstrate how the innovation is beneficial to the investor (in terms of efficiency, inclusion, competitiveness and development, among others) and explain the risks and consequent mitigation strategies.

• Alignment with CNV mission and purpose: Demonstrate how the project contributes to financial inclusion, seeks to protect investors, and promotes the development of a federal, transparent, inclusive, and sustainable capital market.

• Need for CNV support: Demonstrate the need for CNV’s assistance and what results are expected from participation in the "Financial Innovation and Inclusion Hub".

• Maturity level of the project: Include brief information on the business model, target population, general implementation plans and status of the project´s operation.

• Clarity of the proposal: Make the presentation clear and complete.

Although the concept of the HUB's target entities is broad, both in the event and in the text of the Resolution the CNV indicated that it the HUB is mainly aimed at innovative projects for certain areas of the industry to achieve the tokenization of real economy assets or financial assets, trading markets, portfolio management services, credits, etc. 

The Resolution sets forth certain conditions of participation for the Participants tot submit, among which the following are highlighted:

• Participation is voluntary, free and any assistance or guidance provided by the CNV will be informal and should not be considered as legal advice or financial assistance;

• Conversations and/or opinions issued by the CNV within the framework of the HUB will be non-binding;

• Participation shall not extend beyond 12 months from the commencement date and the CNV may at its sole discretion conclude the participation at any time without prior notice;

• Any analysis, opinion or report produced by the HUB does not represent nor may it be interpreted as an approval by the Board of Directors of the CNV of the activity of the Participants within the Argentine territory;

• The Participants may not issue and/or disseminate statements, allusions, expressions or descriptions that may mislead the public about the business or service being endorsed, authorized or approved by CNV by the mere fact of participating in the HUB, nor may they reproduce the CNV's logo; and

• Participation in the HUB does not imply any exemption granted to the entities from complying with the obligations set forth by Law No. 26831 of Capital Markets (the "CML") and its complementary and regulatory rules, as well as with the consequences of its breach. Likewise, the Participants are bound to cease with the activities considered irregular by the CNV.

Finally, a novelty introduced in the virtual event of the HUB launch was the roadmap of the CNV's FinTech Roundtable. The following fundamental work areas were detailed and explained:

• Innovation HUB: Launch and develop the HUB already as explained hereinabove.

• In-house training: It is the CNV's intention to implement a series of in-house training sessions related to FinTech, RegTech, blockchain, cryptoassets, decentralized finance, among other issues. These trainings aim to broaden and deepen the knowledge of the professionals that are now part of the CNV, seeking to have an agency that is adequately prepared to promote innovation and protect the investor.

• Misleading Advertising: The aim is to address misleading or non-transparent advertising by companies that are or claim to be providers of investment services or virtual assets platforms. This initiative seeks to protect investors mainly from promises of high returns without mentioning the associated risks, and other advertising techniques. Specifically, the CNV has pointed out the following courses of action (i) to draft good practice guidelines on advertising matters; and (ii) to work jointly with other agencies that may regulate on this matter according to their own areas of competence.

• Private Offering Regulation: Itis CNV´s intention to regulate this institute that is pending of regulation since Law No. 27440 introduced such power to the CNV when amending the CML. In this way, the CNV's action plan is to implement a regime that, under certain conditions related to issuance amounts, characteristics of the investor and other criteria, exempts these issuances from being subject to a formal procedure before the CNV or they must be registered in a special registry. The CNV pointed out that this initiative, in addition to providing certain alternatives in the traditional capital market, may eventually be used for the tokenization of real assets or investment projects, as long as it complies with the general conditions to qualify as a private offering.

• Regulatory Sandbox: A regulatory sandbox is intended to be implemented in 2023 which will function as a space for experimentation, allowing innovative companies to operate temporarily under certain specific rules that will permit  product and service testing under the regulator’s close scrutiny. Under this model, the aim will be to support through "pilot tests" those initiatives that the CNV considers relevant,  to evaluate and determine, after a certain period of testing time, whether a project or business model can operate as a regulated entity. However, this  testing space will require greater efforts than the HUB.