EGYPT Trends and Developments Contributed by: Dina Kamel, Helal El Hossary, Farida Tawfik and Ahmed Ammar, Zaki Hashem
channels or platforms using modern technological solutions. Any traditional bank or fintech company wishing to establish a digital banking arm must incor - porate a separate entity and apply for a licence from the CBE as per the CBE-issued Board Decree. Digital banks are equally regulated by the CBE as traditional banks, except that they do not offer their services to the public through branches – and noting that specific rules apply to them in relation to the digital nature of their services. CBE regulations of payment services pertain to pay - ment through prepaid cards, contactless payment solutions, payment via mobile cash solutions, instant payments, payment through tokens on mobile devic - es, etc. Some of these regulations were issued previ - ously but are being constantly updated with further editions from the CBE. It is worth noting that such new payment methods – like, for example, Instapay – changed consumers’ behaviours, in particular ena - bling instant payment via all licensed banks. There are also new options for instant transfers between cus - tomer accounts in different banks; these were recently issued by the CBE board. Challenges in the Implementation of the New Regulations FRA regulations implementing the Fintech Law The licensing process for fintech companies in Egypt involves meeting numerous technical, operational and regulatory requirements. Many of the regulatory frameworks and supporting environments are still under development, including digital infrastructure, compliance procedures and client protection meas - ures. Despite these evolving conditions, the FRA con - tinues to issue licences to enable fintech operations under FinTech Law No 5 of 2022. FRA Decree Nos 139, 140 and 141 of 2023 provide guidance on digital identity, digital contracts, NBFS activities and opera - tional compliance for licensed fintechs. Many of these regulations are constantly updated to reflect the most recent technological developments, and to ensure that customers are well protected against fraud, data breaches and cyber-attacks. The rise of NBFS start-ups – which aim to combine NBFS services using innovative technologies like blockchain or the tokenisation of financial instruments
with traditional NBFS services – has also been seen. This trend provides new market opportunities but is not yet frequently offered due to a lack of specific regulations. Such entities are still awaiting crowdfund - ing laws and regulations, which may allow them to offer their services in a more structured environment – without being considered to be offering NBFS in vio - lation of the currently applicable laws and regulations. CBE PSP/PSO Rules The new PSP/PSO Rules shifts the regulatory frame - work from indirect supervision, where entities offering such services operated through indirect licensing from banks, to direct supervision and licensing by the CBE. As previously mentioned, the CBE’s updated licensing processes for PSPs/PSOs introduces a formal, direct and structured regime of licences for PSP/PSO pro - viders. These new regulations are considered a departure from previous practice, imposing new requirements on the market players in this field – from sharehold - ing structure to operational requirements, change-in- ownership pre-approval, etc. Although these require - ments were previously in place, they were in the form of contractual requirements with respect to the rel - evant licensed banks. Now, these entities face CBE direct supervision and scrutiny. This not only applies to PSP/PSO providers but also to prepaid card issuers and other entities licensed by the CBE. The requirements to apply for the PSP/PSO licence include but are not limited to: • the submission of a business plan and feasibility study; • the financial solvency to cover all obligations related to providing the system or service; and • the availability of the necessary expertise and competencies. It is worth noting that payment institutions established outside Egypt but offering their services in Egypt must be licensed by an equivalent regulator in their home jurisdiction, while also having a track record of at least three years in one or more countries other than Egypt, to be eligible to obtain a PSP/PSO licence from the CBE to serve Egyptian customers.
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