New bill establishes two alternative regulatory regimes for Fintech companies who wishes to operate in Israel
Dear Clients and Colleagues,
Recently, the government submitted the bill to encourage the development of technology in the financial field in Israel, 5721-2021 (the “Bill“). The submission of the Bill is a major step in the process of making it simpler for Fintech companies to meet the regulatory requirements in Israel.
The purpose of the Bill is to establish an experimental two to four year regulatory program for Fintech companies in Israel, which will be managed by a designated special committee that will choose the Fintech companies that will take part in the regulatory program (the “Regulatory Sandbox“) The authorized regulatory authority will monitor the progress of the Fintech companies in the Regulatory Sandbox.
As contemplated in the Bill, the Regulatory Sandbox offers two alternative regulatory regimes:
A. License Track. The authorized regulatory authority will be entitled to grant a “tailored” license to Fintech companies with activities that require a permit, license or similar approval from any of the financial supervisory authorities in Israel. The “tailored” license will be valid for a limited period of time, and will be designed specifically to facilitate the adherence to the regulatory requirement of each Fintech company.
B. Accompanying Letter Track. For Fintech companies that are not qualified for the license track, the authorized regulatory authority will be entitled to provide an “Accompanying Letter” in order to address the regulatory difficulties those companies experience. Such letter will include various conditions suited to each Fintech company’s individual activities and risks. Such conditions may include, inter alia, the permitted scope of activity, type or number of customers or investors, the need to submit public reports to the authorized regulatory authority and the actions required to protect the interests of the customers or investors.