Friday Briefing: Learnings from Colombia’s crypto sandbox

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July 8, 2022

#TopStory 🔝

Crypto sandbox advances in Colombia as regulator raises security standards  

Despite the increased volatility in cryptoassets, the Financial Superintendency of Colombia (SFC) says its is making progress with its regulatory sandbox, where banks, fintechs and exchanges experiment with crypto operations.

One of the SFC’s top priorities is strengthening security and transparency measures in the testing environment. A key
lesson from the sandbox process is the need to reinforce consumer protection, promoting clear, precise information that indicates the extent to which an operation is supervised and when that’s no longer the case.

“We’re working on a draft external circular from the Superintendency that’s going to include these additional aspects that supervised entities should require when linking crypto providers to the financial system,” said Ana María Zuluaga, coordinator of the SFC’s financial innovation group, at an iupanaPro event this week.

Sandbox participants test
cryptocurrency cash-in and cash-out operations using accounts in Colombian pesos.

The SFC also wants to improve money laundering prevention, risk management, cybersecurity and compliance with Financial Action Task Force (FATF) guidelines.

The crypto winter has underlined the strong volatility of cryptocurrencies and reinforced the regulator’s cautious approach.

“A bitcoin, a dodgecoin, an ether—in reality they are not backed and they are not conceived as a financial asset. We’ve always understood that, since they
don’t have an underlying fundamental, they’re volatile,” said Zuluaga.

However, the SFC remains open to new financial models. It’s overseeing a pilot issuance of a tokenized bond for the Second Market, which is a space for buying and selling securities for small companies using blockchain technology.

#Regulation ⚖️

🇵🇪 Responsible payer law in Peru: warning of adverse effect on credit growth 

Experts says the bill seeks to regulate something that’s already regulated, highlighting that price controls in the banking industry could lead to greater financial exclusion

🇦🇷 Argentine banks propose tax changes to boost digital money

The banking association presented a series of tax, technological and regulatory initiatives that experts say are urgently needed to stem the use of cash.

🇦🇷 Argentina moves to strengthen money laundering prevention—with an emphasis on virtual transactions

The reform bill seeks to comply with FATF standards, while reinforcing the FIU’s control function over crypto exchanges.

#StrategicPlays 📊

Kavak expands into new markets 

Mexican unicorn Kavak will invest US$180 million to expand its business in LatAm and Eastern Europe. The next markets on the startup’s radar, and its used-car financing arm, are Colombia, Peru and Chile, where it  plans to invest US$120 million; it will also earmark US$60 million for Turkey. However, Kavak acknowledged that it’s making adjustments to its operations in Mexico, Brazil and Argentina due to the macroeconomic context.

Meta shuts Novi, its Guatemalan remittance pilot

Meta announced the closure of its digital wallet Novi, dealing another blow to the bigtech’s foray into finance (remember Libra?). The firm’s venture for sending remittances between Guatemala and the United States using the paxos dollar stablecoin will
cease operations on September 1. Users will be able to transfer their funds to bank accounts or withdraw them as cash.

Mercado Libre and Western Union join forces to provide remittance solutions in Mexico

Mexicans will be able to withdraw their remittances via Mercado Pago digital accounts, following an agreement between Mercado Libre and Western Union.

Similarly, Western Union and Chilexpress launched an application that allows Chilean users to send remittances from any bank account and make withdrawals at WU stores.

The proposal gives a boost to the use of virtual channels in a vertical historically led by cash.

Revolut signs agreement with Stripe to land in Mexico

The British neobank Revolut signed an agreement with financial infrastructure provider Stripe to accelerate its entry into the Mexican market. The agreement also covers Revolut’s operations in Brazil.

#Brazil 🇧🇷

Binance resumes withdrawals and deposits with new provider

Binance resumed withdrawal and deposit operations with Latam Gateway, a Brazilian payment provider, a partnership it says will improve solutions for customers. Binance froze bitcoin withdrawals on its platform in June.

Zig, a funtech? 

Payment fintechs ZigPay and netPDV, which merged their operations in September last year, have changed their name to Zig and have become—according to their managers—a “funtech.” From now on they plan to focus on managing entertainment events in LatAm and Europe.

Payoneer reaches agreement with Husky to boost operations

Payoneer closed a partnership with Husky, a Brazilian fintech dedicated to international payments. The partnership will allow Brazilians to open international accounts and receive payments from the 190 markets where Payoneer has operations.

Edenred launches sales terminals

The French company Edenred debuted Punto, its acquiring proposal for the Brazilian market. It follows a one-year pilot involving more than
6,000 merchants. The solution completes Edenred’s digital ecosystem together with Ticket, a food card.

Proptech Loft fires 380 employees

Brazilian unicorn Loft laid off 380 employees this week, bringing the total to nearly 540 workers retrenched so far this year. The company said the cuts are part a reorganization.

And
also… 

• Central Bank of Chile publishes survey on CBDC:  The Central Bank of Chile is promoting the debate on the possibility of issuing a Central Bank Digital Currency (CBDC) … even though it previously said it didn’t see favorable conditions for such a move. The bank is polling the
  general public, specialists and the financial sector on the technology.
• Pomelo lands in Peru: Pomelo, a financial technology provider, has arrived in Peru; operations will be led by Fiorella Lezama and Carlos Marín.

#Investment  📈

Creditas raises $50m in Series F extension 

Brazilian fintech Creditas received a US$50m investment extension, bringing its series F round to US$310m. The extension incorporates private bank Andbank as an investor and allows Creditas to use the entity’s banking license in Brazil to further expand its credit offering.

In addition, the unicorn is preparing to issue US$150 million of convertible notes to raise capital for the expansion of its ecosystem. It
recently acquired Kzas, a mortgage marketplace for developers and real estate brokers to offer digital mortgages.

Investment in LatAm fintechs falls 23% in the first half of the year

According to Sling Hub, investment in Latin American fintechs in the first half of 2022 reached US$3.1 billion, down 23% from the same period last year. The investments were spread among 119 fintechs.

Brazil’s Warren receives investment from Citi Ventures

Brazilian wealthtech Warren drew Citi Ventures to its series C funding extension. The size of Citi’s contribution wasn’t disclosed, but the fintech’s CEO says the company saw an increase in its valuation. The investment is in addition to the R$300 million (US$56 million) raised in the first stage of the series.

G2 invests in Zenki, a crypto financial services provider
for e-commerce

Mexico’s G2 Fintech Fund expanded its portfolio with Zenki, a product aimed at e-commerce merchants that allows them to collect, obtain credit, invest, make payments and cash out using cryptocurrencies. The size of the transaction wasn’t disclosed.

#iupanaExclusive 🔥

Magazine Luiza wants to take advantage of all the business models that open finance offers Brazil. To do so, it has launched Fintech Magalu, its digital financial arm with which it will take its solutions to third parties, according to Leandro Hespanhol, commercial and new business director of the fintech.

• Fintech Magalu will enable the company to become a technology provider to other companies.
• The fintech has launched two products: a corporate card for SMEs and personal loans.
• Magazine Luiza has
  adapted to technological changes in recent decades and the current economic scenario hasn’t changed its growth plans.

Find out more about Fintech Magalu’s strategy in our exclusive interview