FinTech Comparative Guide

• Jurisdiction: European Union
• Law Firm: Vieira de Almeida & Associados
• Subject Matter: Finance and Banking, Technology, Financial Services, Fin Tech
• Author: Mr Tiago Correia Moreira and José Miguel Carracho
• Published date: 23 May 2023

1 Legal and enforcement framework

1.1 In broad terms, which legislative and regulatory provisions govern the fintech space in your jurisdiction?

There is no general framework governing fintech in Portugal. Therefore, the regulatory treatment of players in the Portuguese fintech space depends on the legal qualification of the different types of companies and the products and services they offer.

The main legal and regulatory frameworks applicable to fintech companies are those relating to payment and e-money services and crowdfunding.

As regards payment services, the main categories of fintech companies are payment service institutions and e-money issuers, both of which are regulated under Decree-Law 91/2018 enacting the Payment Services and E-Money Legal Framework (PSEMLF), which transposed the EU Second Payment Services Directive (2015/2366) into Portuguese law. The PSEMLF also introduced the necessary regulation for third-party providers such as payment initiation service providers and account information service providers to enter the Portuguese market.

Additional sectoral regulations apply to certain entities, depending on the scope of their services and activities.

Crowdfunding and service providers (including crowdfunding platforms) are locally regulated by:

• the Crowdfunding Law (102/2015) and Law 3/2018, setting out sanctions for violations of the Crowdfunding Law; and
• Portuguese Securities Market Commission (CMVM) Regulation 1/2016.

Apart from local laws and regulations, fintech activities are also subject to broader EU-level legal frameworks, such as the EU Crowdfunding Regulation (2020/1503).

1.2 Do any special regimes apply to specific areas of the fintech space?

Yes. Please see question 4.1 for a more detailed analysis of each of the fintech areas covered by specific legal regimes in Portugal.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

Fintech regulation and supervisory oversight are split between two competent authorities, depending on the scope of the matter and the relevant activities – notably, whether they involve payment/e-money services or crowdfunding services.

The Bank of Portugal (BoP), Portugal's central bank, is the financial services regulator responsible for overseeing the banking and financial sector. Banks, credit and mortgage credit institutions, and payment and e-money institutions regulated under the PSEMLF, fall under its supervision. The BoP is also responsible for:

• authorising and registering entities that wish to provide payment services or to register as a payment institution or e-money institution; and
• authorising and overseeing third-party providers.

In the context of the PSEMLF (and other broader financial services regulations), the BoP is the competent authority for the enforcement of the applicable regulatory duties. It has investigative and behavioural supervisory powers, as well as the ability to impose fines ranging from €3,000 to €5 million, depending on the seriousness of the offence.

In addition to pecuniary sanctions, the BoP is competent to apply ancillary sanctions, including:

• seizure and confiscation of the economic proceeds of the offence;
• publication of the final sentence;
• suspension of the exercise of voting rights conferred on members of payment institutions or e-money institutions for a period of between one and 10 years;
• disqualification from holding corporate positions and administrative, managerial, directorship or leadership positions in credit institutions, financial companies, payment institutions and electronic money institutions, for a period of between six months and three years; and/or
• a full or partial ban, for up to three years, on engaging in the business of providing payment services or issuing electronic money.

As far as crowdfunding is concerned, the CMVM oversees all securities market-related business and activities, as well as crowdfunding activities, including the registration and authorisation of crowdfunding platforms and their related activities. The CMVM also jointly oversees, together with the BoP, securities market activities performed by entities that fall under the BoP's scope of supervision.

The BoP was also recently appointed as the national competent authority for anti-money laundering and terrorist financing oversight of crypto-asset service providers. Although crypto-assets are not legally recognised in Portugal, service providers operating in the crypto industry are nonetheless bound to register with the BoP for anti-money laundering purposes.

A specific sanctioning regime applies to crowdfunding based on Law 3/2018, which provides that the entity responsible for legal enforcement is the CMVM. As such, in addition to the regulatory and supervisory powers granted under the Portuguese crowdfunding regime, the CMVM may impose fines ranging between €2,500 and €1 million, depending on the seriousness of the offence.

The CMVM also has the power to impose ancillary sanctions, such as:

• seizure and confiscation of the economic proceeds of the offence;
• temporary interdiction of the offender's exercise of the profession or activity to which the offence relates;
• a prohibition on exercising any administrative, management direction, leadership or supervisory functions and, in general representation in entities that are subject to supervision by the CMVM;
• publication by the CMVM, at the expense of the offender and on publicly accessible websites for the purposes of general prevention of the legal system and protection of the securities markets or other financial instruments, of the sanction imposed; and
• cancellation of the registration required to undertake crowdfunding activities.

1.4 What is the regulators' general approach to fintech?

Please see question 8.1. The Portuguese regulators' approach to fintech is twofold:

• On the one hand, the regulators are responsible for the supervision and legal enforcement of the provisions that currently regulate the fintech space in Portugal (eg, crowdfunding and payment-related services).
• On the other hand, the regulators have been encouraging and supporting the emergence of technological innovation hotspots in the financial sector – notably by promoting and participating in associations aimed at developing platforms and initiatives to help companies, start-ups and banks, among others, comply with the necessary regulatory requirements to establish themselves as fintech players.

1.5 Are there any trade associations for the fintech sector?

Two trade associations serve as contact platforms for companies, stakeholders and interested parties involved in the fintech industry in Portugal:

• Portugal Fintech, established in 2016, has created the Fintech House – an incubator aimed at:
• • facilitating networking opportunities among players in the fintech, insurtech, regtech and cybersecurity markets; and
  • bringing entities into contact with regulators through a physical space (which also accepts virtual membership), while also promoting direct contact with up-and-coming companies and start-ups, as well as more established companies, alongside legal and business consultancy.
• The Fintech and Insurtech Association, also created in 2016 supports technological innovation in the insurance market.

In parallel, Portugal FinLab – a joint initiative of the BoP, the CMVM and the Portuguese insurance regulator – is an acceleration programme aimed at start-ups and other seed-stage fintech companies, which provides a more company-friendly channel of communication with regulators, fostering direct contact.

For initiatives driven by public authorities and regulators, see question 8.1.

2 Fintech market

2.1 Which sub-sectors of the fintech industry have become most embedded in your jurisdiction?

In line with the existing regulatory framework, the most embedded sub-sectors of the fintech industry in Portugal are:

• payment services;
• electronic money institutions; and
• crowdfunding.

Despite the lack of an applicable legal regime, other influential fintech sub-sectors include:

• crypto-asset services;
• insurtech; and
• alternative funding and credit granting activities outside the scope of traditional credit institutions (eg, 'buy now, pay later' services and peer-to-peer lending).

Recent and anticipated developments at the EU level include:

• the Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, amending Directive (EU) 2019/1937; and
• the recent enactment of both:
• • the Regulation of the European Parliament and of the Council on a Pilot Regime for Market Infrastructure Based on Distributed Ledger Technology; and
  • the Regulation of the European Parliament and of the Council on Digital Operational Resilience for the Financial Sector, amending Regulations (EC) 1060/2009, (EU) /2012, (EU) 600/2014 and (EU) 909/2014.

As a result, we anticipate that the Portuguese crypto industry will continue to gain traction, and that both existing and new players will develop and establish themselves in Portugal.

2.2 What products and services are offered?

A considerable variety of fintech services and products are offered in Portugal.

The trends to date have been very much associated with the fields that are currently regulated – that is, payment services and electronic money institutions. Their offerings comprise:

• digital accounts;
• payments and transfers;
• the use of technological resources to apply for online credit and to carry out home banking and open-banking operations; and
• crowdfunding.

Other products on the market relate to the use of digital platforms through blockchain to:

• contract insurance;
• access financial brokerage channels; and
• in particular, access personal finance platforms (including both the trading of securities in capital markets and the trading of cryptoassets).

2.3 How are fintech players generally structured?

According to a Bank of Portugal (BoP) report issued in January 2021, there is no...