Supervision in the financial market is becoming increasingly complex in a world where technological innovation facilitates transactions and operations within companies. These technological advances 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 issues in business. Therefore, the concept helps companies better manage and understand their legal exposure and, as a result, easily comply with regulatory obligations.

The meaning of RegTech refers to startups and technological means aimed at accelerating, monitoring, and optimizing how small, medium, and large companies adapt to regulatory and normative frameworks.

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 comes into play when it sees that social behaviors are being repeated in a disorderly manner,” emphasizes our managing partner, Hector Torres.

“We can understand this term from two perspectives: first, from the regulatory framework that encompasses technological advances, and second, as companies that provide technological compliance solutions for this regulatory framework to third parties,” explains our legal expert.

As part of this revolution in the way business is conducted, new laws have been passed to assist in regulating FinTech. For example, in 2015, the Law to Facilitate Financial Inclusion and the Electronic Signature Law and its Regulation 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 arose a need to create rules and regulations for the supervision of individuals and companies participating in this new business model.

This is where the Bitcoin Law and its Regulation were created, as well as the Digital Asset Issuance Law, the Guide for Digital Asset Service Providers, Technical Standards for Facilitating the Participation of Financial Entities in the Bitcoin Ecosystem, or Guidelines for Authorizing the Operation of Technology Platforms for Bitcoin and Dollar Services.

In the face of these scenarios, our specialist indicates that law firms play an important role as businesses that help other companies adapt to these new laws, regulations, and rules.

“Lawyers can participate in the formation processes to have very specialized technology regulation. Lawyers have become legal technologists with the purpose of making the law more efficient,” concludes Torres.