EGYPT Law and Practice Contributed by: Ibrahim Shehata, Hesham Kamel, Mohamed Abed and Hamza Shehata, Shehata & Partners Law Firm
2.6 Jurisdiction of Regulators There are two main regulators for the fintech industry in Egypt: • the CBE oversees fintech activities within the banking financial services sector; and • the FRA oversees fintech activities within the non-banking financial services sector. Other regulators may also play a role in the fin - tech industry, including: • the National Telecommunications Regula - tory Authority (NTRA), which regulates digital wallet service offers by telecommunication companies; and • ITIDA, which is responsible for overseeing the application of the E-Signatures Law. 2.7 No-Action Letters A no-action letter is a formal communication issued by a regulatory authority indicating that it will not take enforcement action against a company for a specific activity that might other - wise be considered a breach of regulatory rules. This tool is prevalent in jurisdictions with devel - oped financial regulatory frameworks, such as the United States and the United Kingdom, and serves to provide regulatory clarity and assur - ance to businesses, particularly in innovative sectors like fintech. However, the Egyptian legal system does not formally recognise no-action letters. Instead, Egyptian regulatory authorities, such as the FRA and the CBE, may engage in informal guidance or discussions with companies regarding regula - tory compliance. The notion behind no-action letters is to allow companies to test new ideas, such as a new payment solution, before they are released to
the public. In Egypt, a somewhat similar concept is applied through the regulatory sandboxes issued by the FRA (see 2.5 Regulatory Sand- box ). These sandboxes enable fintech compa - nies to test new products in a controlled environ - ment with regulatory oversight, providing a level of regulatory assurance akin to no-action letters, although they are not identical. 2.8 Outsourcing of Regulated Functions Obligations differ according to the fintech sector Under Egyptian regulations, banks cannot obtain services from providers that are not reg - istered with the CBE. Doing so exposes them to full responsibility for any potential complications caused by these unregistered collaborators. In this regard, the Banking Law mandates registra - tion with the CBE for any third party providing services (known as delegated services) on behalf in question, as follows. Banking Fintech Sector The FRA regulates online trading activities in Egypt and has issued specific regulations out - lining the requirements for brokerage companies offering online trading platforms. The Non-Banking Fintech Law has also set out certain conditions for the outsourcing of certain fintech provider functions. In this regard, fintech firms are obliged to conclude due diligence on potential vendors (to whom the functions are outsourced), assessing their financial stabil - ity, compliance history and security practices. Stringent data protection regulations are also applicable when it comes to the outsourcing of some fintech provider functions. Depending on the function outsourced, the fintech provid - ers may be required to report the outsourcing of licensed financial institutions. Non-Banking Fintech Sector
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