The New Fintech Law: Your ultimate guide to Egypt’s techno-legal landscape
Updated: May 30, 2022
Egypt’s new fintech law – entitled “Law Regulating and Developing the Use of Technology for Non-Banking Financial Activities” - was officially published in the Official Gazette on 8th of February 2022 and issued on the 14th of February 2022 (a Valentine’s day gift to the tech community in Egypt). First drafted by the Financial Regulatory Authority (FRA) in 2020, the highly anticipated law sets out a legislative framework for Egypt’s sizable fintech industry – one which has seen immense growth over the past three years[1]. The issuance of this fintech law signal Egypt’s commitment to its 2030 digitization strategy. In this report, I outline the key tenants of this new law, and give an overview of the main laws currently governing Egypt’s techno-legal landscape.
What legislative powers does the law enable?
The law provides the FRA with the sole power of regulating non-banking financial activities and services, the infrastructure and technical requirements of these services, and licensing of actors within the industry. The FRA can issue temporary licenses not exceeding 2 years for new startups. The law also provides the entity with the legislative power to penalize any violations to the law.
Activities and services that fall within the legislative framework are those that use digital applications with the aim of providing services online. These include consumer finance, nano finance, insurance, and financial advisory applications. The FRA's Guidelines and Regulations for the law are still underway. Also underway are the FRA's Board Decrees, which will determine the exact requirements and conditions for licensing.
Artificial intelligence (AI) within the new law:
Most notably, this law includes the first mention of the term “الذكاء الاصطناعي”, AI, in an Egyptian legislation. It outlines the use of AI as a mechanism for detecting incidents that constitute breaches of the law, for identifying risks related to liquidity and suspected money laundry, and for other matters concerning financial stability within the industry.
The law also recognizes the use of AI within robo-advisory electronic applications (RAEA) – applications that provide automated financial advise to customers. Under the new law, authorized entities can utilize these AI-enabled financial advisory systems to analyze customer data, financial positions, and future financial objectives in order to provide technical advice.
What does this mean for the host of fintech companies currently operating within the industry? Well, entities that are subject to the provisions of the law are obligated to rectify their legal position within six months from the date of issuance of the FRA's Guidelines and Regulations, after which penalties are enforced.
This new law is one of many that were introduced during the pandemic. The increased reliance on digital payment applications and non-banking financial services over this period saw the rise of several fintech and tech startups[2]. Regulating the infrastructure and technical requirements of these services and activities is one of the FRA’s main focuses.
The pandemic’s impact on the legal landscape in Egypt:
The introduction of the new fintech law acts as a strong example of Egypt’s rapidly changing techno-legal landscape – one that has largely been shaped by the pandemic. It’s no surprise that online service providers have played a major role in service provision throughout the pandemic. As users, our reliance on tech soared over the past two years – Egypt saw an 8.1% increase in internet users from 2020 to 2021. Numerous apps emerged that enabled us to order groceries, request medical services, pay bills, attend meetings and classes, and so much more – all from the comfort of our home.
This sudden influx of demand prompted the mass introduction and revision of laws regulating technology and service provision in Egypt. As the tech landscape continues to evolve, so do the laws and regulations governing these technologies. Below are some of the most relevant pieces of legislation that currently shape the techno-legal landscape in Egypt.
Telecom Law (2003):
The first law regulating technology in Egypt was issued in 2003 and aimed at regulating telecommunication related services. The law governs all matters related to mobile communications as well as licenses granted to telecom service providers in Egypt.
The implementation of the law saw the creation of a national authority responsible for regulating and administering legislation in the telecommunications sector called the National Telecom Regulatory Authority (NTRA). The NTRA enhances and deploys services in line with the latest technologies available on the Egyptian market. It is tasked with ensuring the provision of fair market prices, transparency, open competition, universal service, and the protection of customers rights. To this day, this is the primary law regulating all mobile network operators and services in Egypt.
Electronic Signature Law (2005):
The Electronic Signature law was first issued in 2005. Although it has not been widely adopted in practice, its executive regulations have been amended several times to account for advancements in the field. Most recently, the 2020 Executive Regulation of the law enables companies to use electronic signatures for digital contracts that are regulated and recognized before the Egyptian Courts.
Anti-Cyber and Information Technology Crimes Law (2018):
The past few years have seen a rise in internet crimes, hacking, fake online identities, and the abusive use of data. In response, the Egyptian parliament issued the Anti-Cyber and Information Technology Crimes Law in 2018, followed by its Executive Regulations in 2020. These regulations require telecommunications companies to retain and store users’ data for 180 days for security reasons in identifying users, metadata, and IP addresses.
At the end of 2021, the NTRA issued a brief legal ‘Framework for Establishing Operating Data Centers and Providing Hosting and Cloud Computing Services’. Together, these frameworks set the technical requirements for data centers and controllers regarding what should be included within technical infrastructure to ensure the security of data.
Media Law (2018):
The Media Law was issued in 2018 and regulates all types of media, including digital media and content. This law requires entities to obtain a license from the Supreme Council for Media Regulations (SCMR) before they establish and manage a website in Egypt, or before establishing branches for website operation from outside of Egypt.
Ridesharing Law (2018):
The Ridesharing Law was issued in 2018 to regulate companies availing transport of passengers using digital technologies, such as Uber, Careem, In Driver, and DiDi. The executive regulations were issued in 2019, and the licensing process is still in process.
Cashless payment by public and private entities (2019):
In 2019, a law mandating the use of cashless payment by public and private entities was issued in an attempt to reduce cash payments, and to ensure payment methods which result in the movement of money into bank accounts. This law aims to encourage the use of bank deposits, transfers, and debit and credit cards.
This law mainly serves as a mechanism through which the Egyptian government can robustly monitor the movement of money to prevent fraud and financial attacks against national security.
Personal Data Protection Law (2020):
The importance of data – as well as its control, processing, and retention – led to the issuance of the Egyptian Personal Data Protection Law in 2020. The law is derived from the EU General Data Protection Regulation (GDPR), and regulates personal data controllers, holders and processors, and their licensing process. While the law is issued and in force, its executive regulations are still underway. Once issued, they will identify licensing requirements for relevant service providers (data controllers, processors and holders).
New Central Bank of Egypt (CBE) Law (2020):
The new CBE law was issued in 2020 and regulates banking activities and services. This includes, but is not limited to, digital banking, payment aggregators and facilitators, and online banking services. The law also includes a definition for cryptocurrencies. CBE Board Resolutions are expected to be issued soon and will outline the details and requirements for the legal licensing of the above activities.
Internet of Things -IoT (Underway):
In January 2022, the NTRA announced that it approved the issuance of a regulatory framework for the Internet of Things (IoT) [3]. Current internet services and broadband capabilities in Egypt fall short when benchmarked against demand and user experience. The question then is: given the state of the telecom sector, are we ready for IoT services now?
E-Commerce law (Underway):
An electronic commerce law is currently being drafted in the parliament. Egypt’s e-commerce sector has seen immense growth over the past few years, and we can anticipate regulations to come into force governing these entities.
Conclusion
As damaging as it has been to numerous markets worldwide, the pandemic created favorable circumstances for the development and adoption of tech-enabled solutions and services. Legislation in Egypt has attempted to keep up with this fast-paced transformation, with the above laws indicating a serious commitment to regulating and enhancing the technology sector.
The complexities surrounding the drafting, lobbying, and ratification of laws and their executive regulations often result in a lag between the creation and implementation of these regulations. We need to remember that technology always evolves at a much faster pace than laws do. And so, as technology advances, we can expect to see several amendments that will attempt to capture this new tech world.
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Notes
[1] In 2019, a report published by the Central Bank of Egypt valued each 1 EGP invested in fintech as contributing 1.6 EGP to the country’s GDP. Statista places Egypt’s Digital Payment transaction value at $14m for the year 2022 – a figure expected to rise over the next few years.
[2] It’s certainly worth noting that the first Egyptian start-up to be listed on the Egyptian Stock Exchange was a tech company providing payment aggregators and facilitators services; the second was a company providing technology in all types and sectors.
[3] IoT refers to an ecosystem where separate devices are interconnected and communicate through telecom networks and the internet.