Crypto adoption in Latin America has grown substantially due to economic challenges, an underbanked population and openness toward technological innovation. Governments take various approaches towards crypto regulations ranging from friendly (El Salvador) to hostile (Bolivia).
Uruguay and Colombia have taken the initiative in creating effective cryptocurrency regulations, while lawmakers in Argentina are proposing bills to tighten regulation over BTC and other digital assets.
Argentina
Blockchain industry growth in Latin America has been rapid, making it crucial that governments adjust their legal frameworks accordingly. Many countries have made strides forward, while some like Bolivia remain silent on this front.
Argentina’s Central Bank is currently contemplating a law to enable banks to work with crypto assets, which would help minimize risks and weed out fraudsters in the ecosystem. Furthermore, Argentina is working on developing an anti-money laundering system specifically tailored for crypto transactions.
One proposed bill would govern the issuance, trading and custodial use of crypto assets; another would impose taxation on their sale; both would create a national registry with companies providing services related to crypto assets registering suspicious transactions and reporting any potential suspicious activity.
Proposed is the creation of a regulatory sandbox, which would enable companies to test out their business models before taking them live. The Financial Superintendence has supported this initiative as they believe it will enhance industry practices while simultaneously combatting money laundering and terrorist financing; additionally, this would encourage eco-friendly mining operations by exempting tax charges for ecological mining operations.
A third proposed bill would create a comprehensive framework for digital transactions. It would define cryptocurrency as a “digital representation of value or rights that can be transferred, stored, and traded electronically using registry technologies”, including new rules for its use as virtual assets. Furthermore, this legislation would prohibit their use for criminal activities as well as penalize violators – thus aligning Argentina with international standards of anti-money laundering legislation.
Bolivia
Cryptocurrencies have taken off in Latin America thanks to an evolving regulatory environment and unique social conditions. Many citizens use digital assets as hedges against inflation in hyperinflation hotspots; Latin America could soon become one of the world’s premier crypto hubs.
However, some Latin American governments are taking a cautious approach to cryptocurrency technology. Although several countries have banned trading and issued laws against crypto investments altogether, others have taken more measured steps towards regulating this space; particularly Mexico and El Salvador which represent two of Latin America’s major economies.
Bolivia’s central bank issued a directive in 2014 prohibiting virtual currencies like bitcoin and ethereum as legal tender or payments for goods or services, along with prohibiting financial institutions from protecting, investing or brokering them. A spokesperson from Bolivian National Banking and Insurance Supervisory Authority (ASFI) told CoinDesk that this was done to protect citizens against scams and fraudsters.
Even with warnings from Bolivia’s government, many citizens of Bolivia continue to use cryptocurrencies despite these warnings. Partly this is because local crypto exchanges offer them as fiat pairs; another factor could be verification requirements which might create barriers to entry for some users.
Many Latin Americans have begun using digital wallets as a secure storage solution for their cryptocurrency holdings, enabling them to purchase and sell cryptocurrencies via credit or debit card purchases. When choosing the appropriate wallet for yourself it’s essential that you be aware of potential risks, while reading up on its terms and conditions before signing up.
Chile
Latin America’s use of cryptocurrency has grown rapidly over time, prompting regulators to develop clear crypto regulations across the region. Unfortunately, most countries have yet to establish these guidelines – some have banned Bitcoin completely while others work toward accepting it as legal payment option.
Chile’s government is taking steps towards regulating cryptocurrency. The Superintendence, the country’s financial supervisory body, recently approved a regulatory sandbox where they can explore unregulated business models. According to them, this will create a learning space both for digital ecosystems and governments alike.
This decision follows several lawsuits filed against exchanges by investors and companies alleging uncontrolled risks from these platforms. Furthermore, the Superintendence has been requested to create a central registry of virtual assets.
Latin American countries recognize cryptocurrency, yet do not regulate its trade, making Latin America an attractive place for companies wishing to establish decentralized and centralized crypto exchanges (DEXes). Furthermore, its financial sector is currently experiencing major reform.
Chile has taken steps to modernise and strengthen its economy, including investing in cutting-edge technologies. One such project allows consumers to pay for goods and services using Bitcoin – marking an important step forward towards developing an alternate economic model.
Worldsys, a company that offers solutions for regulatory compliance and money laundering prevention, believes a robust framework will increase consumer trust in the crypto industry, leading to higher adoption in Latin American markets.
Colombia
Colombia offers low to zero Bitcoin mining taxes, making it an attractive location for cryptocurrency businesses to set up shop. Unfortunately, its lack of an effective tax policy for crypto gains could pose problems for investors; nevertheless, Colombia’s growing consumer base for digital assets is motivating regulatory efforts by discussions of bills submitted.
One key goal of the proposed regulation is to address several important issues. It specifically covers the legal status and exchange rules governing cryptocurrency in Colombia as well as cybersecurity guidelines and ways of tracking transactions on platforms. Furthermore, this proposal includes proposals for a risk management system to counter money laundering and terrorist financing activities.
Additionally, the proposed legislation seeks to create a regulatory framework for deposit and withdrawal operations with crypto asset exchanges. All exchanges will need a license from the Financial Superintendence, providing greater security during deposits and withdrawals as well as greater market transparency.
Finaly, this proposal includes the creation of a specific crime against fraud involving virtual assets that is punishable with up to six years imprisonment – reflecting its significance to Colombia’s economy.
Colombian financial regulator has issued a draft circular that establishes the legal framework of digital assets. It defines “payment cryptoassets” as assets that fulfill payment methods, store of value and unit of account functions but do not have currency-like characteristics like legal tender. Furthermore, creditors do not need to accept these forms of payment when collecting debts.
Peru
As Latin American cryptocurrency markets expand, governments must prepare to regulate them. This is particularly crucial in countries with volatile currencies as this allows individuals to diversify their assets more safely. Legislators in countries where crypto adoption has been swiftest have started presenting bills and proposing regulations accordingly.
Peru, for instance, has begun discussing a framework law to govern cryptocurrency interactions within its borders. This law would establish legal definitions for terms like “cryptoasset” as well as establish duties of crypto service providers such as reporting suspicious operations to authorities. However, according to Peru’s legislator who presented this proposal for debate, this initiative does not seek to make cryptocurrency legal tender in Peru.
Castro Lora, founding director of SUMARA Hub Legal (a firm which helps crypto companies comply with local laws), believes it essential that lawmakers enact a regulatory system suitable for the cryptocurrency industry. While many individuals turn to crypto as a hedge against inflation and political unrest, unregulated activities could exacerbate these problems further.
Castro suggests that cryptocurrency taxes be liberalised, suggesting that heavy tax rates on this industry could severely inhibit its development and drive away potential investors. He proposes using a tax rate of 30 percent when taxing transactions involving cryptocurrency; this applies equally to foreigners investing in the country as it allows this industry to flourish further without jeopardizing its future development.
