Supervisions in the financial market are becoming increasingly complex in a world where technological innovation facilitates transactions and operations within companies. These technological advancements are being regulated, and this is what is known as RegTech.
This concept is derived from Fintech and refers to the application of technology to solve regulatory problems in business. Therefore, the concept helps companies better manage and understand their legal exposure and, consequently, easily comply with their regulatory obligations.
The term RegTech refers to startups and technological means aimed at accelerating, monitoring, and optimizing how small, medium, and large companies comply with regulatory frameworks and norms.
Adapting to these changes is important for governments and companies in any country because it means providing more certainty to these processes and ensuring that all parties benefit from emerging innovations.
"Throughout history, progress and development have always preceded regulation. Regulation needs to come into play when it sees that social behaviors are becoming disorderly," emphasizes our managing partner, Hector Torres.
"We can understand this term from two perspectives: firstly, from the regulatory framework that encompasses technological advancements, and secondly, as companies that provide technological compliance solutions for that regulatory framework to third parties," explains our legal expert.
As part of this revolution in the way business is conducted, new laws have been enacted to assist in regulating Fintech. For example, in 2015, the Law to Facilitate Financial Inclusion and the Electronic Signature Law and its Regulations were approved, in addition to various regulations issued by the Central Reserve Bank of El Salvador (BCR).
However, with the adoption of Bitcoin as legal tender, there was a need to create rules and regulations for the supervision of individuals and companies participating in this new business model.
It is at this point that the Bitcoin Law and its Regulations were created, along with the Digital Assets Issuance Law, the Guide for Digital Asset Service Providers, Technical Standards to Facilitate the Participation of Financial Entities in the Bitcoin Ecosystem, and Guidelines for Authorizing the Operation of Technological Platforms for Bitcoin and Dollars Services.
In light of these scenarios, our specialist indicates that legal firms play an important role as businesses that help other companies adapt to these new laws, norms, and regulations.
"Law firms can participate in the formation processes to have very specific regulation of technology. Lawyers have become legal technologists with the purpose of making the law more efficient," concludes Torres.
-Written by the Torres Legal Team.