Fintech 2024 Comparisons

The fintech market has grown in the past 12 months with the granting of two new licences issued by the Central Bank of Nicaragua for providers of financial technology payment services, for the development of the following services:

• digital wallet operations;
• mobile point-of-sale;
• electronic money;
• electronic trading and currency exchange; and
• fund transfers and online payment gateways.

Currently there are 15 companies licensed. Looking forward, more entities are expected to enter the market and continue to obtain licences for the development of their operations.

The main fintech vertical in Nicaragua is the virtual payments sector.

On 27 April 2022, the “Regulation for Financial Technology Providers of Payment Services and Virtual Asset Service Providers” was issued by the Central Bank of Nicaragua through resolution number CD-BCN-XXV-1-22, which regulates the offering of payment services such as digital wallets, mobile points-of-sale, electronic money, electronic currency trading and exchange services, fund transfer services and/or online payment gateways and the exchange between virtual assets and fiat currencies, exchange between one or more forms of virtual assets, transfer of virtual assets, custody and/or administration of virtual assets or instruments that allow control over virtual assets and participation and provision of financial services related to the offer of an issuer and/or sale of a virtual asset. In addition, any entity that is willing to offer any of these services must register with the Financial Analysis Unit and the Central Bank of Nicaragua.

There are no regulations regarding compensation models.

Fintech companies in Nicaragua must submit to the supervision of the Central Bank of Nicaragua for purposes of their services as financial technology providers of payment services and/or virtual asset service providers. Legacy players (traditional banking institutions) are supervised by the Superintendency of Banks and Other Financial Institutions, however, in order to offer their fintech services, they must register before the Central Bank, which is a more agile and expeditious process than the licensing process that other non-regulated companies must go through.

In Nicaragua, there is no policy for the application of regulatory sandboxes.

In Nicaragua, the authority that has jurisdiction over fintech matters is the Central Bank of Nicaragua (“Banco Central de la República de Nicaragua”) which is responsible for authorising licences to financial technology providers of payment services and virtual asset service providers. The Financial Analysis Unit (“Unidad de Análisis Financiero”) is the regulator that has jurisdiction on AML matters over financial technology providers of payment services and virtual asset service providers licensed by the Central Bank.

In Nicaragua, outsourcing services in favour of financial institutions are regulated.

Such regulations establish the requirements that the contract must include, such as the following.

• Experience and technical competence to implement the operation.
• Financial strength.
• Internal control.
• Contingency plans.
• Insurance coverage.

These requirements must be assessed by the financial institution before subscribing the outsourcing contract.

In Nicaragua, fintech companies licensed by the Central Bank must have procedures for contingency, business continuity and disaster recovery plans, information recovery, information security and confidentiality procedures, and customer service manuals, among others. These entities are also supervised by the Financial Analysis Unit regarding AML matters. They bear responsibility of the activities developed in their platform.

The issuance of the “Regulation for Financial Technology Providers of Payment Services and Virtual Asset Service Providers” (hereafter known as the “Fintech Regulation”) by the Central Bank of Nicaragua, which was originally published at the end of 2020 and then amended in 2022, has demonstrated the regulator’s interest in supporting the good management of the industry.

Industry participants are subject to laws and regulations dealing with anti-money laundering, consumer protection and data privacy and must also comply with the dispositions of the Fintech Regulation issued by the Central Bank of Nicaragua.

There are no other mandatory or enforceable reviews by third parties.

Financial and insurance services may not be offered or provided by an unregulated entity. Should a fintech desire to offer a regulated product or service, it would need to act through the dispositions stated in the Fintech Regulation through Resolution CD-BCN-XXV-1-22.

Fintech companies in Nicaragua must comply with rules issued by the Financial Analysis Unit because they are considered regulated entities. Unregulated companies do not have this supervision and do not have to comply with particular AML rules.

In Nicaragua, there are no policies or regulations regarding robo-advisers.

In Nicaragua, there is no regulation for robo-advisers. Some legacy players are using robot operators for customer service on different channels such as social media and web pages.

Customer trades practices regarding robo-advisers are still not applicable in Nicaragua.

In Nicaragua there are different types of lending modalities, such as credits granted by banks and credits granted by microfinance entities which have different regulations regarding the amount, term, and interest rate. However, there is no special regulation for online lenders.

There is no regulation for underwriting processes for online lenders.

Traditional sources of funding loans are available, such as taking deposits, lender raised capital, subordinated debt, and public/private issuances. Peer-to-peer lending is not developed by the fintech market. Companies dedicated to granting loans in Nicaragua are not able to receive money from the public, so they must seek their funds from investors or from funding entities.

Syndication of loans is permitted by Nicaraguan law and actively used by local players. There is no special process for syndicated loans, as it follows the same guidelines as all other regular loans. The terms of the contract will govern the transaction.

Payment processors shall use the existing payment rails regulated by the Central Bank of Nicaragua.

Cross-border payments are not regulated in Nicaragua. However, remittance companies shall comply with the “Regulations for Remittance Payment Service Providers” issued by the Central Bank of Nicaragua through Resolution CD-BCN-LIX-2-19 of 27 December 2019, which regulates the authorisation and operation of the services provided by remittance payment service providers in the Republic of Nicaragua. These Regulations define Remittance Disbursement Service Providers as: Natural or juridical persons whose main purpose is the provision of remittance disbursement services, in their different modalities, both physical and electronic.

Fund administrators are regulated by the securities market as investment fund administrators. A licence is required to provide services and undertake the activities required to act as that kind of entity. The regulation differentiates two types of funds: companies that manage non-financial assets and companies that manage financial investment funds.

The contractual terms for assuring performance and accuracy by fund administrators can vary depending on if the company is a regulated entity or not. In the regulated sector, the law provides most of the information on performance rules and accuracy. For non-regulated actors, it depends on the contractual terms agreed between the parties.

For public offerings of securities, there is the Nicaraguan Stock Exchange. The Regulation issued by the Central Bank permits the services of trading and exchange of virtual assets.

General provisions for trading assets are found in the Civil and Commercial Code of Nicaragua. Trading of securities is subject to the special Law of Capital Markets and virtual assets services are regulated in the Fintech Regulation.

Platforms that manage the use of virtual assets are regulated under the Fintech Regulation through Resolution CD-BCN-XXV-1-22.

Traditional securities must be registered with the Superintendence of Banks and the Nicaraguan Stock Exchange. Trades can only take place through Brokerage Firms registered in the Stock Exchange, unless a private placement takes place. Virtual assets providers must be registered under the Central Bank.

In Nicaragua, there is no specific regulation on order handling rules.

In Nicaragua, there is no specific regulation on peer-to-peer trading platforms.

In Nicaragua, there is no specific regulation on customer trades.

In Nicaragua, there is no specific regulation on payment for order flow.

The basic principles are the promotion of the conditions of transparency and competitiveness that make possible the proper functioning of the market, seeking the protection of the investors.

There is no specific regulation regarding creation and usage.

There is no specific regulation with respect to registration of those acting in a principal capacity as market makers.

There is no specific regulation concerning funds and dealers.

There is no specific regulation regarding programmers and programming.

There is no specific regulation for DeFi.

There is no specific regulation for registration of financial research platforms.

There is no specific regulation of unverified information.

There is no specific regulation with respect to conversation curation.

In Nicaragua, insurtech is not specifically regulated.

According to Nicaraguan applicable law, there are different types of insurance, and each type has its specific regulation, treatment and coverage. The most common insurance policies offered are life, property, casualty, all risk insurance, and civil responsibility.

Regtech providers are not regulated in Nicaragua.

If legacy players enter into regtech contracts in Nicaragua, they must comply with the regulations of outsourcing services. Some matters may not be outsourced, such as AML monitoring of financial institutions.

Traditional players are implementing blockchain in their online banking services, in which they offer to make transfers in mobile applications or web pages, as well as pay for basic services and send money to be withdrawn in cash.

In Nicaragua there is no specific regulation on blockchain. However, the services authorised by the Fintech Regulation include services that require the use of blockchain for their development.

The Regulation issued by the Central Bank does not establish any classification on virtual assets, it only regulates the services of:

• exchange between virtual assets and fiat currencies;
• exchange between one or more forms of virtual assets;
• transfer of virtual assets;
• custody and/or administration of virtual assets or instruments that allow control over virtual assets; and
• participation and provision of financial services related to an issuer’s offering and/or sale of a virtual asset.

There is no specific regulation of issuers of blockchain assets.

There is no specific regulation for blockchain asset trading platforms.

There is no specific regulation of funds.

Virtual currencies and blockchain assets are treated the same. There is no alternative classification for blockchain assets in Nicaragua.

There is no specific regulation regarding DeFi platforms.

In Nicaragua, there is no classification for the different types of blockchain assets, therefore, NFTs do not have any specific regulation.

In Nicaragua, open banking has not been regulated yet.

In Nicaragua, the topic of concerns raised by open banking has not been allowed or regulated yet. Bank secrecy principles apply to financial services, so once this type of service is allowed they will need to comply with particular regulations.

The main element of fraud is deception, which can trigger misrepresentation, falsification, and other crimes.

The types of fraud on which regulators are most focused are deception, scamming and falsification. They seek to protect the identification of users by protecting their personal data.