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1 Authorized and enforcement framework
1.1 In broad phrases, which legislative and regulatory provisions govern the fintech house in your jurisdiction?
The fintech house is ruled by quite a few legal guidelines and rules, together with the next:
- the Non-cash Fee Strategies Legislation (18/2019);
- the Central Bank of Egypt (CBE) and Banking Sector Legislation (88/2003) and its Government Regulation;
- the E-signature Legislation (15/2004) and its Government Regulation;
- the Non-Monetary Markets and Devices Legislation (10/2009);
- the Microfinance Legislation (141/2014;
- the Commerce Code (17/1999);
- the Client Finance Legislation (18/2020);
- the Cybercrime Legislation (175/2018);
- the Funding Legislation (72/2017) and its Government Regulation;
- the Client Safety Legislation (181/2018) and its Government Regulation;
- the Small and Micro-Sized Enterprises Legislation (141/2004) and its Government Regulation;
- the Telecoms Legislation (10/2003);
- the Media Legislation (180/2018);
- the Capital Market Legislation (95/1992) and its Government Regulation;
- the Movable Collaterals (Securities) Legislation (115/2015) and its Government Regulation;
- the Anti-money Laundering Legislation (80/2002) and its Government Regulation;
- the Public Entities Contracts Legislation (182/2018) and its Government Regulation; and
- Presidential Decree 89/2017 founding the Nationwide Funds Council (NPC).
Globally, the banking and finance sector is evolving quickly, not least as a result of incursions of fintech gamers. Egypt, which has seen two current revolutions in 2011 and 2013, has likewise been affected by these dynamics, in addition to native political challenges. In response to a request from the CBE, the federal government has proposed a brand new draft Banking Legislation, based mostly on steering issued by worldwide consultancy corporations; a comparative research of different nations’ legal guidelines; worldwide requirements, the Basel Framework; suggestions of the Organisation for Financial Co-operation and Growth (OECD), the World Bank Group and the Worldwide Financial Fund; and suggestions made by the banks which might be registered with CBE.
As per the Egyptian Structure, the brand new draft Banking Legislation was submitted to the Egyptian Home of Representatives for evaluate and approval. After a evaluate of just about 5 months, the Egyptian Home of Representatives launched a variety of amendments to the brand new draft Banking Legislation, which was permitted in precept by the Egyptian Home of Representatives on 5 May 2020.
1.2 Do any particular regimes apply to particular areas of the fintech house?
Sure, particular regimes apply to a number of areas of the fintech house, together with the next:
- gross sales and buying and selling, together with quick promoting; and
- infrastructure instruments.
- fee processing, together with technical fee aggregators and fee facilitators, contactless funds, pay as you go playing cards and cellular funds.
- instruments to handle payments and observe private and/or credit score accounts.
- regulatory compliance software program.
1.Three Which our bodies are liable for imposing the relevant legal guidelines and rules? What powers have they got?
A number of our bodies are liable for imposing the fintech-related legal guidelines and rules, together with the next:
- The CBE is empowered by the Banking Legislation to manage bank accounts and banking transactions, amongst different issues.
- The Info Know-how Growth Company is empowered by the E-signature Legislation to advertise and develop the IT and communication business, help small and medium-sized enterprises in utilizing e-transactions and regulate e-signature providers actions, amongst different issues.
- The Monetary Regulatory Authority (FRA) is empowered by the FRA Legislation to license non-banking monetary actions and make sure the safety of stakeholders inside the non-banking monetary market, amongst different issues.
- The NPC is empowered by Presidential Decree 89/2017 to scale back the usage of cash exterior the banking sector, help and encourage the usage of digital fee strategies and channels, and shield customers of all fee system and providers.
- The Nationwide Telecommunication Regulatory Authority is mostly empowered by the Telecoms Legislation to manage and enhance telecommunications providers.
1.Four What’s the regulators’ common method to fintech?
All regulators recognise the speedy evolution of the fintech house worldwide. This is the reason, for instance, the CBE has just lately proposed a brand new draft of the Banking Legislation that features a chapter regulating fintech, together with the chance to subject cryptocurrencies for the primary time in Egypt.
This method can be mirrored in a variety of tasks and rules adopted by the CBE and the FRA.
The Egyptian authorities has taken steps to maintain tempo with the evolution of the fintech house and keep away from pointless forms in an effort to appeal to extra international direct funding to Egypt.
1.5 Are there any commerce associations for the fintech sector?
There is no such thing as a commerce affiliation devoted to fintech particularly. Nevertheless, fintech falls inside the actions of some commerce associations, such because the Federation of Egyptian Banks.
2 Fintech market
2.1 Which sub-sectors of the fintech business have develop into most embedded in your jurisdiction?
The fee/billing sector seems to be essentially the most embedded fintech sector in Egypt.
2.2 What services are provided?
The next fintech services are primarily provided in Egypt:
- worldwide cash transfers and monitoring software program;
- capital market gross sales and buying and selling;
- infrastructure instruments for monetary establishments;
- fee processing;
- subscription billing software program instruments;
- instruments to handle payments and observe private and/or credit score accounts; and
- on-line registers for movable collaterals.
2.Three How are fintech gamers typically structured?
Fintech gamers are typically structured within the type of a joint stock firm integrated below the Funding Legislation. Nevertheless, usually, the Firms Legislation (159/1981) and the Commerce Code present for a number of authorized enterprise constructions much like these obtainable in North Africa and Europe, which may be utilized by fintech gamers, together with the next:
- a department of a international firm, which is usually used to carry out works of contractual nature;
- a joint stock firm, which resembles a US company or a French société anonyme;
- a restricted legal responsibility firm, which corresponds to the French société à responsibilité limitée. This resembles an integrated partnership, a US closed company or a UK personal restricted firm; and
- a one-person firm, which is a quite simple restricted legal responsibility firm that may be owned by one companion (ie, shareholder) solely.
Every construction has its personal execs and cons, which needs to be rigorously thought of earlier than figuring out which type to make use of.
2.Four How are they typically financed?
Fintech gamers, and particularly worldwide fintech gamers, are often financed by their founders and/or personal fairness homes. On this regard, a variety of funding initiatives can be found to fintech start-ups in Egypt. For instance, in March 2019 the Central Bank of Egypt (CBE) launched a Fintech Innovation Fund with a value of EGP 1 billion (roughly $63,291,619).
In April 2019 the Worldwide Finance Company, in collaboration with two native companions, launched a two-year programme to help the fintech house in Egypt. That very same month, the World Bank Group put aside $200 million for small and medium-sized enterprises in Egypt, which will also be accessed by fintech gamers.
2.5 How are they positioned inside the broader monetary providers panorama?
The Egyptian fintech sector is booming and reveals vital potential for progress.
2.6 Do start-ups typically outsource again workplace capabilities and is there a developed marketplace for them to entry? What are the authorized implications of outsourcing?
No, it’s not frequent for fintech gamers to outsource again workplace capabilities. Most depend upon their very own assets, particularly with a view to defending their know-how. This may change when the fintech market turns into extra developed.
Three Applied sciences
3.1 How are the next key applied sciences within the fintech house regulated and what particular authorized points are related to every? (a) Web (e-commerce); (b) Cellular (m-commerce); (c) Huge knowledge (mining); (d) Cloud computing; (e) Synthetic intelligence; and (f) Distributed ledger know-how (Blockchain, cryptocurrencies)
(a) Web (e-commerce)
There is no such thing as a particular legislation governing e-commerce in Egypt. Nevertheless, Egypt has a number of e-commerce-friendly legal guidelines and rules, such because the E-Signature Legislation, the Funding Legislation, the Client Safety Legislation and the Governmental Contracts Legislation.
For instance, e-commerce enterprise actions are coated by the Funding Legislation, which supplies a variety of ensures and incentives for firms that perform these actions, topic to the satisfaction of particular standards. These embody the next:
- the grant of residence permits to international buyers during their funding tasks in Egypt;
- an exemption from stamp obligation and notarisation charges for articles of incorporation, services and loan agreements, safety paperwork and/or agreements for the acquisition of plots of land for 5 years, ranging from the date of registration with the Business Registry;
- the applying of a unified customs obligation at a flat price of two% of the value of all tools, equipment and gadgets wanted to determine the funding challenge; and
- a decreased tax price, calculated on the premise of a selected method, for seven years, ranging from the date of graduation of the funding challenge in Egypt.
Basically, in line with the Digital Signature Legislation and its Government Regulation, e-correspondence, e-signatures and e-documents have the identical diploma of authenticity as non-electronic correspondence, signatures and paperwork below the Proof Legislation (25/1968), supplied that it’s technically potential to find out the time, date and supply of their creation.
On this regard, the Info Know-how Growth Company licensed a variety of e-signature suppliers to verify the satisfaction of those technical necessities. If one in all these e-signature suppliers confirms that an organization satisfies the technical necessities, all e-correspondence, e-signatures and e-documents issued by that firm could have the identical diploma of authenticity as non-electronic correspondence, signatures and paperwork.
The Financial Courtroom has rendered a variety of judgments based mostly on e-correspondence, e-signatures and e-documents that don’t fulfill the technical necessities.
The most recent Client Safety Legislation, which was issued in 2018, for the primary time in Egypt recognises e-commerce transactions by together with a definition of the time period ‘distance contract’, which refers to any transaction involving the provide on the market, sale or buy of merchandise utilizing the Web or every other visible, audible, printed or telephonic medium. Distance contracts should adjust to all provisions of the Client Safety Legislation, except in any other case acknowledged therein.
The Client Safety Legislation additionally grants customers the appropriate to amend or appropriate any order made by way of a distance contract, ranging from the date of accepting such order except in any other case agreed between the events. It’s worth noting the brand new draft Banking Legislation explicitly exclude CBE in addition to any entity that’s topic to its supervision from the applying of the Egyptian Client Safety (181/2018) and the Egyptian Antitrust Legislation (3/2005)
(b) Cellular (m-commerce)
M-commerce is mostly topic to the identical legal guidelines and rules governing e-commerce. Nevertheless, a selected regulation governing cellular funds was issued by the Central Bank of Egypt (CBE) in November 2016, setting out the minimal necessities that banks should meet to authorise cellular funds. These relate, amongst different issues, to:
- danger administration;
- prospects’ safety;
- cellular cash;
- partnerships with service suppliers;
- confidentiality; and
The Cellular Fee Regulation doesn’t apply to cellular banking, which is ruled individually.
Every bank can subject cellular cash in an quantity of as much as 5% of its paid-in capital or EGP 50 million (roughly $3,164,580.95), whichever is decrease.
Cellular cash may solely be issued in Egyptian kilos, and never in every other forex.
Native cellular cash transactions inside Egypt are allowed inside particular each day and month-to-month thresholds established by the CBE. Nevertheless, these thresholds may be exceeded the place a optimistic know-your-customer and authentication course of is adopted.
The Cellular Fee Regulation additionally permits the receipt of cellular cash transfers from overseas, topic to the satisfaction of a number of circumstances. Amongst different issues, such transfers have to be transformed into Egyptian kilos and are restricted to pure individuals.
(c) Huge knowledge (mining)
Sadly, there may be as but no particular regulation of massive knowledge. Nevertheless, that is a part of the CBE’s ongoing technique, so the state of affairs may change sooner or later.
(d) Cloud computing
Cloud computing is topic to the Cybercrime Legislation, which applies to any celebration that immediately or not directly supplies customers with IT or telecommunications service, together with knowledge processing or storage. Such suppliers should retain and retailer customers’ knowledge for at the least 180 days, together with the next:
- identification knowledge;
- the content material of the service supplier’s system;
- communication site visitors;
- terminal knowledge; and
- every other knowledge required by the Nationwide Telecommunication Regulatory Authority.
In accordance with the Media Legislation, a licence from the Supreme Council for Media Regulation is required earlier than launching an internet site in Egypt in any of the next instances:
- The web site might be based in Egypt;
- The web site might be managed by a celebration in Egypt; or
- Any of the web site’s subdomains might be managed by a celebration in Egypt.
(e) Synthetic intelligence
Sadly, as but there is no such thing as a particular regulation of synthetic intelligence (AI).
Nevertheless, in 2019 the minister of upper training started so as to add particular AI departments to a number of engineering universities in Egypt.
(f) Distributed ledger know-how (Blockchain, cryptocurrencies)
Sadly, as but there is no such thing as a regulation of blockchain or cryptocurrencies.
The brand new draft Banking Legislation features a chapter regulating fintech, which for the primary time would permit for the chance to subject cryptocurrencies in Egypt.
4.1 How are the next key actions within the fintech house regulated and what particular authorized points are related to every? (a) Crowdfunding, peer-to-peer lending; (b) On-line lending and different types of various finance; (c) Fee providers (together with marketplaces that route funds from prospects to suppliers (eg, Uber and AirBnb); (d) Foreign exchange; (e) Buying and selling; (f) Funding and asset administration; (g) Threat administration; (h) Roboadvice; and (i) Insurtech.
(a) Crowdfunding, peer-to-peer lending
Basically, below the Banking Legislation and several other judgments of the Egyptian Financial Courtroom, no pure or authorized particular person can conduct banking actions in Egypt with out being licensed by and registered with the Central Bank of Egypt (CBE).
The Banking Legislation defines ‘banking actions’ as:
- receiving deposits;
- offering refinancing, loans or comparable services;
- contributing to the share capital of native firms; and
- every other actions which might be thought of to represent banking actions by customized, carried out regularly and because the essential enterprise actions of the celebration conducting them.
This definition can be confirmed within the Commerce Code. Beneath the Banking Legislation, any celebration that violates this provisions shall be topic to a penalty of imprisonment for between 24 hours and three years, and/or a effective of between EGP 5,000 and EGP 50,000 noting that this effective was elevated below the brand new draft Banking Legislation to be between EGP 100,000 to EGP 1,000,000. The licensing requirement applies the place:
- the banking actions are carried out regularly; and
- the banking actions are the primary actions of the celebration conducting them, whether or not that be a pure or authorized particular person.
In gentle of the above, crowdfunding and peer-to-peer lending are permissible solely so long as these two essential circumstances will not be met.
The Egyptian authorities itself has used crowdfunding to fund public utility tasks. For instance, crowdfunding was utilized in 2014 to fund the event of the New Suez Canal, which value round EGP 30 billion (roughly $1.9 billion). As one other instance, Presidential Decree 139/2014 established a non-public fund referred to as the Tahya Misr Fund to help the Egyptian authorities in establishing improvement and repair tasks, the event of slums and micro-small tasks, amongst different issues.
(b) On-line lending and different types of various finance
In accordance with a round issued by the CBE in 2014, no bank registered with the CBE can present web banking options, together with on-line lending, with out prior authorisation from the CBE. All banks registered with the CBE should meet particular authorized necessities, together with offering the CBE with a penetration take a look at report.
(c) Fee providers (together with marketplaces that route funds from prospects to suppliers (eg, Uber and AirBnb)
A selected regulation governs any answer supplied by technical fee aggregators or fee facilitators, which supplies that providers settlement have to be topic to particular know-your-customer and anti-money-laundering checks, and should embody particular phrases and circumstances for these providers, together with a restriction on subcontracting, except sure circumstances are being met.
The Client Finance Legislation, issued on 16 March 2020, governs any exercise aimed on the financing or buy of services or products by customers, so long as this exercise is carried out regularly. Such actions embody financing by way of fee playing cards or every other means determined by the CBE.
Client finance actions may not be carried out in Egypt and not using a licence from the Monetary Regulatory Authority (FRA), and may be carried out solely by joint stock firms with an issued capital of at the least EGP 10 million (roughly $633,649).
It’s worth noting that oo one is now allowed below the brand new draft Banking Legislation to hold out any exercise of working fee system or offering fee system except a previous license is obtained by CBE. This new restriction is utilized to all individuals, whether or not pure or juristic individuals, finishing up such exercise inside Egypt or offering such providers overseas to any residents in Egypt aside from Stock Exchanges, Futures Exchanges, Securities Settlement Programs, licensed Central Clearing, Depository and Registry Programs, Custodian Banks, inner techniques of the Egyptian Ministry of Finance that doesn’t embody fee, assortment, set off or clearance of fee.
(d) Foreign exchange
Foreign exchange is regulated by the Banking Legislation and its Government Regulation. All banks registered with the CBE and licensed foreign exchange firms are allowed to exchange foreign exchange.
For a corporation to qualify for a foreign exchange licence, it have to be integrated within the type of a joint stock firm with a minimal paid-up capital of EGP 5 million (roughly $318,400) and its enterprise actions have to be restricted to foreign exchange. Moreover, your complete capital of a foreign exchange firm have to be owned by Egyptian nationals.
The minimal paid-up capital might be elevated below the brand new draft Banking Legislation to EGP 50 million (roughly $3.17 million).
(e) Buying and selling
On-line buying and selling is topic to a selected regulation which requires brokerage firms to fulfill sure circumstances and necessities in an effort to present buying and selling options on-line. These circumstances and necessities embody particular technical necessities and circumstances referring to the IT infrastructure of the corporate.
(f) Funding and asset administration
There’s a particular regulation governing funding and asset administration providers that use know-how or know-how options from third-party suppliers.
(g) Threat administration
Sure rules have to be glad to make use of danger administration know-how.
There is no such thing as a particular regulation on roboadvice in Egypt. Nevertheless, the FRA has been following worldwide tendencies with a view to regulating roboadvice.
A selected regulation governs insurtech in Egypt, which supplies that sure circumstances have to be met by the related insurance coverage firm, together with taking all measurements to forestall any fraudulent acts.
5 Information safety and cybersecurity
5.1 What’s the relevant knowledge safety regime in your jurisdiction and what particular implications does this have for fintech firms?
There is no such thing as a private knowledge safety legislation in Egypt as but. Nevertheless, on 24 February 2020 the Home of Representatives lastly permitted the primary draft private knowledge safety legislation, which needs to be permitted by the Egyptian president except he has any feedback, which may be very unlikely.
The Information Safety Legislation will prohibit the switch, storage and/or sharing of private knowledge that was collected or ready for processing to any international state, except the next two essential circumstances are glad:
- The third state applies a safety degree that’s at the least equal to that utilized within the draft Information Safety Legislation; and
- A licence from the Private Information Safety Centre is obtained.
The Government Regulation to be issued for the permitted Information Safety Legislation will set out the insurance policies, standards, necessities and guidelines to be met for the switch, storage, sharing, processing and safety of private knowledge throughout borders.
What the licensing course of might be is as but unclear; nonetheless, it’s anticipated that this can differ relying on a variety of components, together with:
- the nation to which the non-public knowledge might be transferred;
- nationwide safety issues; and
- whether or not the related nation permits the switch of private knowledge to Egypt.
The permitted Information Safety Legislation is not going to apply to the Central Bank of Egypt (CBE) or to entities regulated by the CBE, aside from foreign exchange entities, which might be topic to the brand new draft Banking Legislation.
5.2 What’s the relevant cybersecurity regime in your jurisdiction and what particular implications does this have for fintech firms?
In accordance with the Cybercrime Legislation, all suppliers of IT and telecommunications providers, together with providers involving the processing or storage of knowledge, should retain and retailer customers’ knowledge for at the least 180 days, together with the next:
- identification knowledge;
- the content material of the service supplier’s system;
- communication site visitors;
- terminal knowledge; and
- every other knowledge required by the Nationwide Telecommunication Regulatory Authority.
These suppliers should additionally maintain all saved and archived knowledge (together with private knowledge) confidential and never disclose such knowledge except there’s a courtroom order to take action.
6 Monetary crime
6.1 What provisions govern cash laundering and different types of monetary crime in your jurisdiction and what particular implications do these have for fintech firms?
Cash laundering is principally ruled by the Anti-money Laundering (AML) Legislation and its Government Regulation.
The AML Legislation lists 15 entities that should adjust to the AML Legislation and its Government Regulation. These entities embody all banks, branches of international banks in Egypt and cash switch entities.
These entities are additionally topic to a number of obligations below different legal guidelines governing their actions. Breach of those obligations may incur completely different penalties, together with fines and/or imprisonment.
7.1 Does the fintech sector current any particular challenges or issues from a contest perspective? Are there any pro-competition measures which might be focused particularly at fintech firms?
Cash laundering is principally ruled by the Anti-money Laundering Legislation and its Government Regulation.
As a way to assess whether or not there may be an antitrust-related danger, it should first be decided whether or not the related fintech participant is taken into account to have a dominant place as outlined below the Egyptian Antitrust Legislation (3/2005) and its Government Regulation.
To ensure that a fintech participant and its managed associates in Egypt to be deemed to take pleasure in a dominant place below the Antitrust Legislation, they have to meet the next standards:
- They’ve a market share of greater than 25% available in the market for every service they supply, calculated based mostly on the related merchandise and the geographical space over a sure interval.
- They can make an influence on the pricing and/or the provision of market merchandise.
- Their opponents will not be able to restrict their dominant place.
The primary and second factors above are reviewed and assessed by the Egyptian Competitors Authority (ECA) based mostly on particular standards.
If a fintech participant does in truth take pleasure in a dominant place within the related market, will probably be prohibited from conducting sure practices or getting into into agreements with its suppliers and/or prospects that restrict competitors.
Any violation of the Antitrust Legislation might be decided by the ECA on a case-by-case foundation in line with particular standards, together with the advantages for purchasers and business practices. This evaluation is topic to judicial evaluate by the Egyptian financial courts.
8.1 How is innovation within the fintech house protected in your jurisdiction?
Innovation within the fintech house be protected as both know-how or patents. Nevertheless, on condition that the supply code may should be disclosed to sure entities, copyright safety must also be thought of.
8.2 How is innovation within the fintech house incentivised in your jurisdiction?
Please see query. 3.1 concerning funding incentives.
9 Expertise acquisition
9.1 What’s the relevant employment regime in your jurisdiction and what particular implications does this have for fintech firms?
Employment in Egypt is ruled by the Egyptian Labour Legislation, which recognises three broad kinds of employment contract:
- Employment contract for particular work: That is concluded for particular work and ends as soon as the related work is accomplished.
- Employment contract for a particular interval: This ends on the expiry of the particular interval, however may be renewed for a number of intervals. If the work interval ends and the worker continues to work for the employer with out renewal of the employment contract, will probably be thought of an employment contract for an indefinite interval.
- Employment contract for an indefinite interval: This may be terminated by the worker by advantage of resignation, after offering the employer with a discover interval. The employer also can terminate the employment contract in particular instances the place the worker has dedicated a critical or gross error specified within the Labour Legislation. If the error isn’t thought of a critical or gross error by the Labour Courtroom, the worker shall be entitled to compensation amounting to at the least two months of wage for every year of service.
9.2 How can fintech firms appeal to specialist expertise from abroad the place needed?
Overseas workers should acquire a piece allow in an effort to work in Egypt. A request have to be submitted to the Ministry of Manpower and Immigration; the allow has a period of 1 12 months, however might be renewed yearly as much as a most of three years.
The ratio of international workers should not exceed 10% of the whole variety of workers and should not exceed 20% of the corporate’s payroll.
In accordance with the Firms Legislation, the workers of an organization with a capital of at the least EGP 250,000 (roughly $15,941.54) are entitled to at the least 10% of the earnings distributed by such firm (upon distribution), which should not exceed the annual payroll of such firms.
10 Tendencies and predictions
10.1 How would you describe the present fintech panorama and prevailing tendencies in your jurisdiction? Are any new developments anticipated within the subsequent 12 months, together with any proposed legislative reforms?
Egypt is likely one of the three largest economies in Africa and is strategically positioned at a crossroads between the East and West, making it a big participant in worldwide commerce within the Center East and Africa area. Egypt is house to the Suez Canal, which connects the Mediterranean Sea with the Pink Sea and is a key artery in world commerce.
The Egyptian authorities has been working onerous to draw extra international direct funding (FDI) to the nation. Consequently, Egypt has been named one of many high 5 locations globally for greenfield FDI, in line with the Monetary Occasions. Cairo was additionally named one of many high 10 cities on this planet to discovered a tech start-up final 12 months, in line with Forbes.
The Banking Legislation will quickly get replaced with a whole new legislation immediately addressing the fintech house.
11 Ideas and traps
11.1 What are your high suggestions for fintech gamers in search of to enter your jurisdiction and what potential sticking factors would you spotlight?
Fintech gamers which might be in search of to enter Egypt ought to rigorously think about all obtainable authorized constructions, in addition to one of the best ways to maximise the safety of their funding.
They need to additionally think about the upcoming authorized developments that may have an effect on their enterprise within the very close to future.
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