An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

The Cen­tral Bank’s long-await­ed Pay­ment Sys­tems and Ser­vices Bill is be­ing wel­comed by fin­tech op­er­a­tors as a ma­jor step to­ward mod­ernising Trinidad and To­ba­go’s fi­nan­cial sys­tem, but in­dus­try play­ers are warn­ing that parts of the leg­is­la­tion could un­der­mine the very in­no­va­tion it is try­ing to en­cour­age.
At the heart of the de­bate are con­cerns over cap­i­tal re­quire­ments, re­stric­tions on mul­ti-cur­ren­cy trans­ac­tions, the ab­sence of open bank­ing man­dates, and what fin­tech op­er­a­tors de­scribe as a lack of for­ward-look­ing pol­i­cy around blockchain and sta­ble­coins.
The draft leg­is­la­tion has trig­gered a se­ries of con­sul­ta­tions by the Cen­tral Bank over the past two weeks, in­volv­ing lo­cal and re­gion­al fin­tech com­pa­nies, pay­ment providers, and tech­nol­o­gy firms as reg­u­la­tors seek feed­back be­fore the frame­work is fi­nalised.
At the for­mal me­dia launch of the con­sul­ta­tions on Wednes­day, founder of WamNow Tech­nolo­gies Mark Pereira de­scribed the pro­posed frame­work as a sig­nif­i­cant achieve­ment, but ar­gued that pol­i­cy­mak­ers were not ful­ly ac­count­ing for the pace of tech­no­log­i­cal change.
“So we do wel­come it, for sure. The one thing is, if we’re go­ing to do it, be­cause what they al­lud­ed to is some­thing they want to take us for­ward over the next five years, then we re­al­ly need to as­sess the cur­rent land­scape and do things right,” Pereira said.
“Giv­en that we have an un­prece­dent­ed ele­phant in the room, which is AI and blockchain and tech­nol­o­gy, we re­al­ly should look at this frame­work and think about the next decade and I think that’s what’s not be­ing done.”
Pereira not­ed that T&T nev­er pre­vi­ous­ly had a ded­i­cat­ed pay­ments law and ar­gued the cur­rent bill rep­re­sent­ed a ma­jor con­sol­i­da­tion of frag­ment­ed fi­nan­cial reg­u­la­tions.
“We nev­er re­al­ly had a ded­i­cat­ed pay­ment law. So this Cen­tral Bank bill and these fi­nan­cial acts are con­sol­i­dat­ing every­thing in­to a mod­ern frame­work, which is a ma­jor achieve­ment mov­ing for­ward, but we def­i­nite­ly need to fu­ture-proof it.”

Cap­i­tal bar­ri­ers and “train­ing wheels”

One of the strongest ob­jec­tions raised dur­ing con­sul­ta­tions cen­tred on cap­i­tal re­quire­ments for fin­tech op­er­a­tors.
Pereira ar­gued the cur­rent frame­work dis­pro­por­tion­ate­ly favours banks and large for­eign firms while plac­ing lo­cal star­tups at a dis­ad­van­tage.
“My view is that fin­techs are the in­no­va­tors. They’re the ones solv­ing the prob­lems for the small man. They’re more ag­ile and more tech­nol­o­gy-na­tive. How­ev­er, fin­techs are re­al­ly just be­ing treat­ed as if we need train­ing wheels,” he said.
“While we do need mech­a­nisms in place to give us a leg up, we’re not tech­nol­o­gy-hand­i­capped, we’re cap­i­tal-hand­i­capped.”

Un­der the pro­posed leg­is­la­tion, op­er­a­tors would be re­quired to meet min­i­mum cap­i­tal thresh­olds in or­der to ob­tain li­cences.

Pereira main­tained that high-en­try re­quire­ments risk shut­ting out small­er in­no­va­tors be­fore they can scale.
“These cap­i­tal re­quire­ments favour in­cum­bents like for­eign com­pa­nies with big bud­gets or banks with big bud­gets. The re­quire­ments for cap­i­tal re­al­ly need to be low­ered for en­try in­to a fin­tech.”

The is­sue al­so drew com­ments from the founder of Pay­Wise Ltd and vice-pres­i­dent of the Fin­Tech As­so­ci­a­tion of T&T, Ian Al­leyne, al­though his po­si­tion dif­fered slight­ly.
Al­leyne backed the pro­posed $500,000 up­front cap­i­tal re­quire­ment, ar­gu­ing that se­ri­ous op­er­a­tors in the sec­tor must be pre­pared to in­vest heav­i­ly in cy­ber­se­cu­ri­ty and in­fra­struc­ture.
“That may seem like a tall or­der, but if you are in this in­dus­try, and if you re­al­ly and tru­ly have to pro­vide a very ro­bust and strong plat­form, then that is the in­vest­ment you have to make.”

How­ev­er, Al­leyne pro­posed a com­pro­mise through the reg­u­la­to­ry sand­box mod­el.

“One rec­om­men­da­tion would be to help per­sons par­tic­i­pat­ing in the sand­box, even if they don’t meet the min­i­mum $500,000 ini­tial­ly. They can still op­er­ate with­in the sand­box, and when they at­tain that min­i­mum lev­el of cap­i­tal, they can then ex­it the sand­box.”

He sug­gest­ed com­pa­nies en­ter­ing the sand­box should pro­vide a roadmap out­lin­ing how they in­tend to achieve the cap­i­tal thresh­old with­in three to six months.
“The sand­box is nec­es­sary. The $500,000 is a re­quire­ment if you’re play­ing in this field se­ri­ous­ly, but if a new en­trant doesn’t meet that thresh­old ini­tial­ly, then they can en­ter in­to the sand­box and at­tain it with­in that pe­ri­od.”

Al­leyne de­scribed the leg­is­la­tion as a pos­i­tive de­vel­op­ment for the fi­nan­cial sec­tor over­all.

“I think it’s a good time to bring for­ward leg­is­la­tion that will help to bet­ter reg­u­late the in­dus­try and pro­vide more clar­i­ty in terms of how op­er­a­tors can pur­sue de­vel­op­ment of their prod­ucts and of­fer ser­vices to the wider pop­u­la­tion.”

He added that the old­er frame­work was re­stric­tive and out­dat­ed.

“The old­er reg­u­la­tions were very stymied in terms of their ap­proach and scope, but I be­lieve the new leg­is­la­tion of­fers wider scope and bet­ter un­der­stand­ing for ac­tors with­in the in­dus­try.”

Mul­ti-cur­ren­cy fight in­ten­si­fies

A ma­jor flash­point emerg­ing from con­sul­ta­tions con­cerns re­stric­tions on elec­tron­ic mon­ey is­suers op­er­at­ing in for­eign cur­ren­cies.

Pereira warned that lim­it­ing lo­cal fin­techs to TT-dol­lar trans­ac­tions would place them at a se­vere com­pet­i­tive dis­ad­van­tage while for­eign plat­forms con­tin­ue of­fer­ing Trinida­di­ans ac­cess to US-dol­lar ser­vices.

“These EMIs (e-mon­ey is­suers) are be­ing locked in­to on­ly trans­act­ing with TT, where­as that is just putting hand­cuffs on the in­no­va­tors,” he said.
“We’re say­ing we shouldn’t be re­strict­ed to TT dol­lars on­ly, and that’s not a stan­dard be­ing picked up glob­al­ly.”

He point­ed to in­ter­na­tion­al ex­am­ples where fin­techs are al­ready op­er­at­ing in mul­ti­ple cur­ren­cies.
“We’re see­ing that in Sin­ga­pore, South­east Asia, Mau­ri­tius, and Eng­land. So if we’re im­ple­ment­ing our frame­work for the next five to 10 years, then why are we re­strict­ing mo­bil­i­ty for our star­tups?” the founder lament­ed.

Pereira ar­gued that many Trinida­di­ans al­ready con­duct busi­ness in US dol­lars through on­line shop­ping, for­eign bank ac­counts and dig­i­tal pay­ment ser­vices.
“What we’re see­ing is that Trinida­di­ans are al­ready deal­ing in US dol­lars con­stant­ly. Sta­ble­coin com­pa­nies are en­abling cit­i­zens the abil­i­ty to get US ac­counts and vir­tu­al ac­counts and these for­eign providers are al­ready do­ing things lo­cal providers can­not.”

He warned that fail­ing to al­low lo­cal com­pa­nies to com­pete in that space would ul­ti­mate­ly weak­en do­mes­tic fin­tech de­vel­op­ment.
“You’re kind of shoot­ing your­self in the foot be­cause you’re not en­abling your lo­cal providers to do things for­eign providers can do.”

Pereira al­so crit­i­cised the ab­sence of open bank­ing man­dates in the draft leg­is­la­tion.
“The bill de­fines pay­ment ini­ti­a­tion ser­vices and ac­count in­for­ma­tion ser­vices, but there’s no ma­jor man­date from the Cen­tral Bank to open APIs or re­quire banks to give ac­cess to fin­techs.”

He point­ed to in­ter­na­tion­al suc­cess sto­ries, in­clud­ing Brazil’s fin­tech sec­tor and dig­i­tal banks in the Unit­ed King­dom.

Blockchain gap rais­es con­cern

An­oth­er area draw­ing crit­i­cism is the treat­ment of blockchain tech­nol­o­gy and sta­ble­coins with­in the leg­is­la­tion.
Pereira ar­gued that while the Trinidad and To­ba­go Se­cu­ri­ties and Ex­change Com­mis­sion has frame­works around vir­tu­al as­sets and se­cu­ri­ties reg­u­la­tion, the pay­ments leg­is­la­tion does not suf­fi­cient­ly ad­dress the grow­ing role of blockchain-based pay­ment sys­tems.
“What we’re not see­ing is ac­knowl­edg­ment of the pay­ment side of sta­ble­coins and vir­tu­al as­sets. If we want to fu­ture-proof the Act, then we re­al­ly should be ac­knowl­edg­ing the pay­ment side of sta­ble­coins and vir­tu­al as­sets be­cause blockchain as­sets are be­ing used for pay­ments glob­al­ly,” he out­lined.

He point­ed to the ex­plo­sive growth in sta­ble­coin trans­ac­tions world­wide.
“Sta­ble­coin pay­ments have now over­tak­en the vol­ume of Visa and Mas­ter­Card com­bined. It’s ac­tive­ly be­com­ing the pre­ferred method of pay­ment for small busi­ness­es glob­al­ly.”

The draft bill al­so im­pos­es sig­nif­i­cant penal­ties for op­er­at­ing with­out ap­proval, in­clud­ing fines of up to $10 mil­lion and prison sen­tences.

“The penal­ties are very heavy-hand­ed for fin­techs as well,” Pereira ar­gued.

Re­gion­al fin­tech play­ers par­tic­i­pat­ing in the con­sul­ta­tion process al­so called for clear­er de­f­i­n­i­tions with­in the leg­is­la­tion.

Se­nior com­mer­cial and risk of­fi­cer at Cu­ra­cao-head­quar­tered CX PAY, Cas­san­dra Brown-De Camps, said while the bill was ro­bust over­all, tech­nol­o­gy providers re­mained con­cerned about am­bi­gu­i­ty.

“We ac­tu­al­ly do not pro­vide e-mon­ey; we are a tech­nol­o­gy provider, so the bill is still very rel­e­vant to us. The bill in its essence was ro­bust, but there were ar­eas that could ben­e­fit from bet­ter clar­i­fi­ca­tion in or­der to re­duce am­bi­gu­i­ty and in­ter­pre­ta­tion bias, es­pe­cial­ly re­gard­ing tech­nol­o­gy ser­vice providers,” Brown-De Camps.

She warned that the de­f­i­n­i­tions con­tained in the leg­is­la­tion could un­in­ten­tion­al­ly clas­si­fy tech­nol­o­gy firms as reg­u­lat­ed pay­ment ser­vice providers.

“The de­f­i­n­i­tion was too broad. It helps to drill down what ex­act­ly it is and what ex­act­ly it is not, be­cause how it was de­fined, a play­er such as us may be at risk of be­ing per­ceived as a PSP, where­as in re­al­i­ty we are on­ly a tech­nol­o­gy provider.”

De­spite the con­cerns, stake­hold­ers broad­ly praised the Cen­tral Bank’s will­ing­ness to en­gage di­rect­ly with the in­dus­try through mul­ti­ple rounds of con­sul­ta­tion.

Pereira de­scribed the process as one of the most pro­gres­sive steps tak­en by reg­u­la­tors in years.

“If there is any­thing hap­pen­ing in this space, we need to be in the same room, we need to have mul­ti­ple con­sul­ta­tions,” he said.