Centeral Bank of Iran to Establish Fintech Regulatory Body

The Central Bank of Iran is planning to launch a new regulatory body specifically for fintech firms, a CBI official announced on Sunday.

“CBI has been working on fintech regulations since last year. We are planning to develop an ecosystem to authorize the operation of financial startups and fintech firms,” Ali Kermanshah, director of CBI’s Office for Innovative Technologies, was quoted as saying by IBENA, a website close to the central bank.

“A heavy project is underway at CBI. A safe and healthy environment would lower risks for innovators and fintech firms, and result in their development,” he said.

Kermanshah noted that CBI is facing obstacles for regulating fintechs.

“Redefining regulations to make them more efficient and launching a new body to watch innovative firms’ operations are key challenges for CBI,” he said.

“Banking regulations in Iran are inefficient and restrictive. Our regulations should encourage innovation in the sector.”

Back in October, Nasser Hakimi, the head of CBI’s IT Department, said CBI allows fintech firms to continue to operate as long as they are not involved in money creation, currency exchange, offering payment tools (like cards) and  attracting deposits.

Shaparak, an affiliate of CBI, which is in charge of regulating payment network, announced earlier that it only authorizes fintech firms affiliated with banks or PSPs.

Kermanshah said the current regulations could be used for authorizing fintech operations in the country.

“But we need a more comprehensive framework that addresses all the aspects of innovation in the financial sector and aims to promote new financial technologies,” he said.

 “We will make use of innovators’ viewpoints and other countries’ experiences for developing the framework.”

Unofficial reports show that more than 50 fintech firms are operating in Iran, all of which have developed in the past three years.

A majority of fintechs offer payment services while newly-established startups are getting involved in other aspects of the industry like peer-to-peer lending, personal finance management, saving services and insurance.

A large group of non-bank payment services got blocked in late March, when transactions peak for the annual Norouz (new Iranian year) shopping season that starts on March 20. The move is estimated to have killed 1,000 jobs that relied on non-bank payment services for running their businesses.

 Too Many Cooks

Last week, the Office of Vice President for Science and Technology Affairs said it would send the final version of “financial framework of knowledge-based economy” to the government by Dec. 21, in which fintech firms have been recognized as legitimate e-commerce entities.

It noted that the Cabinet had tasked the office to develop the framework back in October, with the body saying that it would work closely with the Central Bank of Iran and the Ministry of Economy.

In another update, an official of the Ministry of Communications and Information Technology announced the development of a framework for the operation of fintechs.

“The framework has been sent to CBI that will review the framework by December 21. It will be sent to the government to be reviewed and passed in a Cabinet meeting as a part of Iran’s e-government regulation,” Reza Baqeri-Asl was also quoted as saying by Way2pay.ir earlier this week.

The recent move has raised hopes among experts and innovators, as lack of proper supervision has been posing major challenges for the operation of fintechs in Iran.

However, the large number of top bodies has posed another major challenge for regulating the sector, which may not happen any time soon.

The CBI, as the financial market’s only regulator, is supposed to develop the framework. In fact, it is the only agency that can guarantee innovators’ security and their compatibility with financial regulations.