BRAZIL Law and Practice Contributed by: Alessandra Martins and Amanda Blum Colloca, Machado, Meyer, Sendacz e Opice Advogados
2.2 Regulatory Regime All fintechs are regulated by either the BCB or CMN, or are not regulated by any regulatory authority. In the first instance, it is necessary to differenti - ate traditional banks from fintechs. Traditional Banks The types of traditional banks are as follows: • commercial banks collect public funds through timed settlement deposits ( depósito à vista ) and term deposits ( depósito a prazo ), and mediate the circulation of funds between investors and borrowers; • investment banks grant loans of fixed or working capital and collect funds through financial deposits, but do not operate via timed settlement deposits; and • multiple banks operate the functions of com - mercial banks and have other products such as investments and/or foreign exchange services. Fintechs can be divided into licensed fintechs and unlicensed fintechs. Licensed fintechs can be further divided into the macro-categories of (i) credit fintechs; (ii) payment fintechs; and (iii) investment fintechs. Credit Fintechs The types of credit fintechs are as follows: • direct credit companies ( sociedades de crédi - to direto SCDs) grant loans, provide financing and acquire credit rights through their own capital and their electronic platforms; • P2P lending companies ( sociedades de empréstimo entre pessoas SEPs) conduct loan transactions between peers through their electronic platforms; and
• SCFIs can provide investments and loans to their clients. Payment Fintechs The types of payment fintechs are as follows: • electronic currency issuers (electronic money institutions; EMEs) are payment institutions that convert physical currency into digital cur - rency and vice versa, issuing pre-paid pay - ment instruments to their clients; • post-paid instrument issuers are payment institutions that manage the post-paid pay - ment accounts of end users and enable pay - ment transactions based on those accounts; • acquirers are payment institutions that do not manage payment accounts and enable mer - chants to accept payment instruments – and participate in the settlement thereof – as the creditor before the issuer; and • payment initiation service providers (PISPs) are payment institutions that do not hold funds or manage payment accounts but enable end users to initiate payment transac - tions from one account to another. Investment and Foreign Exchange Fintechs The types of investment and foreign exchange fintechs are as follows: • DTVMs/CCTVM offer investments and foreign exchange products to their clients; and • foreign exchange brokers offer foreign exchange settlements of up USD500,000 per transaction. Unlicensed Fintechs Unlicensed fintechs essentially implement the following business models: • marketplaces work as sub-acquirers, accred - iting merchants to accept payment instru -
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