In a scenario in which cryptocurrencies are becoming more and more relevant, Latin American states are looking for ways to configure regulation around this new type of digital assets. Jason Simon, an expert in the different Latin American markets, explains how this region and its different countries accept cryptocurrencies.
The cryptocurrency fever has shown that this new and leading economic actor is not only a subject of interest for those who invest, but also for the states, which seek to regulate it. Gradually, governments are putting aside their reticence towards these currencies and are devising strategies to provide them with a coherent and viable regulatory framework according to the reality of each jurisdiction.
In 2013, Bitcoin (BTC) had an impressive rise and reached $1,000 in valuation. That moment marked a turning point in the crypto market and began to trigger alerts about the importance that cryptocurrencies were beginning to have and the possibilities they generated.
“To this day, few countries have adopted cryptocurrency regulation, but in several countries, there are already bills under discussion, tests and study commissions,” says Simon. The expert is aware that each country adapts differently to this space, and this should be essential for many of its investors.
For Simon, cryptocurrencies have undoubtedly gained momentum since their launch in 2009. “However, for much of this time, operations have operated under scenarios that lack regulation or fully defined control frameworks,” he adds.
The expert explains that, faced with the positioning and wide acceptance that these assets had, governments were forced to have a deeper knowledge of cryptocurrencies. From this reality is that the need for regulation arises.
“Latin American countries are in a phase of the initial understanding of the phenomenon that allows building a clear regulation. Working teams formed by expert commissions were created together with central banking to define the respective frameworks for action,” reveals Simon.
In the giant of Latin America, Brazil, there were four bills for the regulation of cryptocurrencies that had in common the obligation to comply with the Money Laundering Law and apply the Consumer Protection Code. The novelty is that this year, Irajá Abreu, the senator of the Social Democratic Party, presented a bill that unifies them all.
Its purpose is to give transparency to operations and avoid tax evasion and money laundering. In addition, if the source is clean and renewable, a zero tax rate would be imposed on energy expenditure.
The case of Mexico is in a gray area regarding the regulatory framework, since there is no law that directly regulates cryptocurrencies. In 2018, the FinTech Law was sanctioned in the country to regulate financial technology institutions, which obliges the Bank of Mexico to issue the corresponding regulation regarding cryptocurrencies and the financial system. “This law assumes that financial institutions cannot transfer operations or risks to the end user, although it does not restrict service providers with cryptocurrencies,” explains Simon.
The Peruvian Congress is debating the draft Framework Law for the Commercialization of Cryptoassets, presented by the Podemos Perú party. This proposes the creation of a public registry of crypto service providers. It would also require the reporting of “suspicious” operations to the Financial Intelligence Unit.
In Ecuador, the manager of the Central Bank, Guillermo Avellán, mentioned that the entity will regulate cryptocurrency activity during the first quarter of this year, in order to delimit the field of action and avoid crimes such as money laundering and scams. The next step would be to submit a regulation for the Monetary Board to review, and for such regulation to be approved by the second or third quarter of the year.
Both in Peru and Ecuador, it was explicitly clarified that such regulation proposals do not imply that Bitcoin will become legal tender. Even so, they admit that the state cannot be left out of its activity.
When it comes to Colombia, the Financial Superintendency approved a regulatory sandbox: a controlled, learning space where pilots of possible business models not yet regulated are carried out. The purpose of this initiative is to experiment and study a regulation for the new capital format, by thoroughly investigating the knowledge about it.
On the other hand, since April, it was declared that bitcoin transactions exceeding $150 must be notified to the country’s Financial Information and Analysis Unit. Failure to comply with such an order would have penalties of between 100 and 400 minimum wages.