Czech Republic’s fintech industry is in its active development stage right now. The industry is growing substantially: startups are expanding in numbers, big fintech companies are coming to the Czech market. Moreover, banks started developing and applying fintech solutions as well. As a result, despite the ongoing crisis brought by the pandemic, the idea of registering a fintech or crypto business in the Czech Republic now seems rational and appropriate.
Regulation of fintech activity
In the beginning, it is crucial to clarify what fintech activity in the Czech Republic is subject to regulation. The Czech National Bank is the key regulating authority monitoring this jurisdiction – all controlled banking and financial institutions.
Prior to conducting investment activities in the Czech Republic, it is necessary to get a specific license. Next, the provision of banking services in the Czech Republic requires a license, too.
Trade and lending in loans
The rules for consumer loans are dictated by the same law that introduced the Mortgage Lending Directive. It means that obtaining a lending license for non-bank entities happens under strict conditions. Alternatively, there is no special limitation for credit trade, yet it does not concern consumer loans.
P2P consumer lending
The Czech legislation only requires the license obtainment for issuing loans if lending is conducted by a commercial company. When it comes to the provision of unregulated financial services, a trading license is considered to be sufficient.
In order to ensure that credit agreements are concluded on an equal basis, the contract requires three obligatory steps:
- Expression of the will of the parties to conclude an agreement
- Determination of the key aspects of the contract (terms, amount, loans, etc.)
- The written form of the contract.
The conclusion of agreements on security payments entails identical conditions.
Crowdfunding
As probably everyone knows nowadays, crowdfunding is a way of public funding where investors financially support those who have original ideas and help to implement them. For the Czech Republic, unless crowdfunding is engaged in raising deposits or offering investment instruments to the public, it is not viewed as a regulated activity.
Fintech certification for companies
As an exception, fintech companies registered in the EU or EEA can provide regulated services in the Czech Republic without a need to obtain a Czech license or authorization. Yet, these companies are supposed to own an appropriate passport.
Anyway, it would be worth noting that the Czech lawmakers are preparing an amendment on the Law on Obligations in the Capital Market. If this amendment is adopted, certified companies without a branch in the Czech Republic will only be able to provide investment services temporarily.
Anti-money laundering measures
In the Czech Republic it is obligatory to comply with the AML principles for all fintech companies that provide cryptocurrency services. Additionally, the performance of KYC procedures is mandatory for banking and investment companies.
Artificial intelligence in blockchain and cryptoassets
- Artificial intelligence
The Czech Republic does not have any specific legislation for AI usage in business. Once it is determined under which regulation the robot’s activity belongs, licenses and permits are issued respectively.
As an example, the general requirements from the GDPR and relevant national legislation are applicable for a program that processes personal data of users to create a catalog with chatbot expressions.
- Blockchain
Besides the general GDPR rules for the protection of personal information, the Czech legislation does not use other regulatory principles when it comes to the use of blockchain technology in business.
- Digital assets
Just as the provision of payment services, cryptoassets in the Czech Republic are regulated by the Law on Payment Services and provisions on AML.
- Cryptoexchanges
Generally, for cryptocurrency exchanges it is sufficient to have a trading license, no additional regulation is conducted. However, this does not apply to the cases that engage in cryptoassets derivatives’ trade or payment services.
- ICO in the Czech Republic
Mostly the Czech regulators consider companies that open for ICO to be collective investment schemes. Therefore, such companies are obliged to obtain investment activities’ license.
- Cybersecurity and information protection
The work of fintech companies does not acquire any special conditions for processing personal data. As usual, national Personal Data Law and principles of GDPR are applied.
- IP protection
Due to technology being mainly presented in a software form or computer code, copyright is the major way of legal protection for fintech. In the Czech Republic specifically, copyright protection is informal. Similarly, a trade secret that is sometimes used for software protection, is not a part of formal registration either. For design and branding protection there are other multiple provisions used.
As it may come across as noteworthy, in the Czech Republic different forms of protection of industrial property rights (like official registration requirement) can be used for software protection, too.
In terms of the protection of trademarks and the names of programs, the Trademark Law regulates this sphere in the Czech Republic.
- IP co-ownership
For cases when not one but a group of individuals work together on software development, all developers’ have equal protection rights. Co-authors have a right to go to court in case one of the developers does not agree to give their consent for the implementation of the IP rights protection. Each developer may fight violations or suspected violations of their intellectual property and defend their rights.
- IP development by contractors and employees
There is a rule that applies to software like programs, databases and others created both by employees and contractors. The IP rights related to that software developed as a part of work for the company belongs to the company as well. The exception can be possible if agreed in advance.
Brand protection in the Czech Republic
In the Czech Republic you can encounter two forms of TM protection: formal and informal. The TM registration must be performed in the Czech Industrial Property Office or at the EU level in EUIPO.
Before deciding on a company or product name, it is crucial to ensure that there are no other existing companies or products with the same one. Otherwise, the registration would not be possible. The registration of domain names has the same conditions.
Finishing word
This article on the regulation of cryptocurrencies and fintech in the Czech Republic was primarily prepared for informational purposes and should not be used as legal advice. In case you still have any questions about this topic that bother you, COREDO team is prepared to answer them. Just get in touch with us and we will arrange a consultation. COREDO specialists provide more detailed information on fintech business in the Czech Republic given their experience in this market and rules of this jurisdiction.