Companies that act as Payment Institutions will have to request authorization to the Central Bank of Brazil, a measure that may brake innovation in the country
The Central Bank of Brazil published Resolution BCB No. 24 on this fifth issue (22), which stipulates, among other things, that all „electronic money issuers“ must be authorized by the Central Bank.
Thus, fintechs and companies that issue prepaid cards that can be loaded with Reais or Bitcoins will be regulated by the Central Bank.
„The resolution requires that, as of March 2021, payment institutions that issue e-money be previously authorized by the Central Bank to operate,“ a statement from the Central Bank noted.
However, not all companies issuing „electronic money“ will be regulated until 2021.
According to the Central Bank’s publication, there will be a „staggered“ deadline for companies to request authorization.
„Art. 6-A. The payment institution must request authorization from the Central Bank of Brazil to begin providing payment services:
I – in the modality of initiator of payment transaction, observing the provisions of Art. 11-A; and
II – as from March 1, 2021, in the electronic money issuer modality“. (NR)
„Article 6b. The payment institution that, on March 1, 2021, provides service as an electronic money issuer and is not authorized by the Central Bank of Brazil must request authorization to operate:
I – if it reaches, by December 31, 2021, financial transactions in excess of at least one of the following amounts:
a) R$500,000,000.00 (five hundred million reais) in payment transactions; or
b) R$50,000,000.00 (fifty million reais) in resources kept in a prepaid payment account;
II – if financial movements in excess of at least one of the following amounts are achieved between January 1, 2022 and December 31, 2022:
a) R$300,000,000.00 (three hundred million reais) in payment transactions; or
b) R$30,000,000.00 (thirty million reais) in resources kept in a prepaid payment account; and
III – from January 1, 2023 until June 30, 2023, if it does not reach the financial movements established in clauses I and II of the caput“ stresses the Resolution.
The new Central Bank Resolution may directly affect cryptomoeda companies in Brazil that operate with the modality.
What was it like before?
Before the new Resolution was published, only institutions with transactions in excess of R$500 million in payment transactions needed Central Bank authorization; or R$50 million in funds held in a prepaid payment account.
During the process of applying to the Central Bank, payment institutions must maintain at least a paid-in capital of R$ 1 million.
„Art. 30. The payment institution authorized to operate by the Central Bank of Brazil shall pay in and maintain a minimum capital of
I – R$2,000,000.00 (two million reais), for each of the modalities provided for in items I to III of art. 4; and
II – R$1,000,000.00 (one million Reals), for the modality foreseen in item IV of art. 4“.
According to the CB, the new rule aims to reduce the risks associated with the modality.
„In addition, an amendment to Circular 3681 of 2013 was approved to adjust the risk management structure and establish capital requirements to cover the risks associated with the provision of payment initiation services. With the amendment, the operational risk management structure should identify, monitor and control failures in the initiation of payment transactions, segregating the occurrences in: (i) unauthorized initiation, (ii) non-execution of initiation, (iii) incorrect execution, and (iv) delay in initiation“.
Payment institution
The CB Resolution focuses on establishing new rules for payment institutions targeting the opportunities of Pix and Open Bankng.
Thus, the Central Bank approved with the Resolution the constitution of a new payment institution modality, called payment transaction initiator.
This new payment institution has as its main activity the initiation of payment transactions without participating in the financial flow. This service consists of the initiation of a payment transaction ordered by the end user, in relation to a deposit or payment account, commanded by an institution that does not hold the account.
Thus, according to the Central Bank, this new institution will allow for the expansion of Open Banking, an ecosystem whose participants are institutions authorized to operate by the Central Bank of Brazil.
In this environment, the provision of payment transaction initiation services is independent of the establishment of contracts between the payment transaction initiator and the entities holding the deposit or payment accounts.
„Shared payment transaction initiation, together with Pix, has strong synergy that will enable the definition and consolidation of new business models in the payment system, with greater legal security and appropriate risk management. This is expected to promote innovations and increase competition in the provision of payment services, since the initiation service enables the command of payments through different institutions, at the customer’s request, regardless of where the accounts involved in the transaction are domiciled. Any institution initiating a payment transaction may command a PIX transaction at any institution holding a deposit or payment account,“ the CB said.