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    Landscape of crypto regulation in Latin America

    Simar Marwaha
    Simar Marwaha
    Published on December 16, 2022 6:29 PM

    Updated on January 10, 2023 2:14 PM

    Latin America has historically been a latecomer in the technology sector, but it has the potential to become a worldwide leader in the budding cryptocurrency sector. This article examines Latin American cryptocurrency regulation country by country.
    Landscape of crypto regulation in Latin America
    Source: UNESCO

    Cryptocurrencies are gradually becoming more accepted in several Latin American countries. The region may develop into one of many significant worldwide centres for developing technology, driven by an evolving legislative framework, distinctive sociological conditions, energy availability and a few forward-thinking politicians. This article aims to examine some of the laws that have an impact on the area's crypto hotspots.

    Latin American individuals received $562.0 billion in cryptocurrencies between July 2021 and June 2022, ranking the region as the sixth largest cryptocurrency market in our index this year. This is a 40% increase from the sum from the previous year. Five of the top 30 nations in this year's crypto ranking are located in Latin America: Brazil (ranked 7th), Argentina (ranked 13th), Colombia (15th), Ecuador (18th), and Mexico (28).

    Many Latin American nations are impoverished and have limited access to the financial system, including conventional banking and financial services. Being able to transfer and save money is essential for overcoming poverty. Decentralized finance (DeFi) and bitcoin might change this.

    Numerous nations in Latin America either keep large amounts of US dollars in foreign reserves, peg their currencies to the US dollar, or utilise the US dollar as their primary means of exchange. This puts these nations dependent on the US economy and frequently subject to the whims of an outside authority. Economic dependency on international remittances worsens the issue.

    Some of the region's officials are supporting cryptocurrencies as a complete answer, driven either by a desire for greater economic/political autonomy or a preference for new technology. As an alternative, several nations in this area have acknowledged that they must regulate cryptocurrencies in order to make taxes easier and ensure compliance with international standards set by the Financial Action Task Force (FATF).

    State of Cryptocurrency Regulation Country-by-Country in Latin America

    Argentina

    Argentina anticipates new cryptocurrency limitations in accordance with IMF rules intended to combat money laundering. Government directive 796/2021, which has not yet been formalised into law, requires exchanges to submit data on their transactions on a monthly basis.

    Buenos Aires, the nation's capital, also declared on April 27 that it will begin accepting cryptocurrencies in exchange for paying taxes. The unstable peso and mistrust of the government has accelerated bitcoin adoption in Argentina. For example, in 2021 they made $1.86 billion from cryptocurrencies.

    Brazil

    A plan to transfer regulatory authority to the executive branch of government and eliminate import taxes on ASIC machines was approved by the Brazilian Senate on April 27. The bill also establishes sanctions for organisations employing cryptocurrency for fraud, if it is approved by President Bolosnaro. The majority of Brazil's legislation to far have been geared around requiring participants in the cryptocurrency ecosystem to abide by the country's anti-money-laundering laws.

    The use of cryptocurrencies in Brazil may increase as a result of this carrot-and-stick strategy. It will also assist in funding a number of other initiatives, such as the development of a CBDC.

    El Salvador

    El Salvador has long been outperforming its size in the crypto ecosystem, despite being one of the smallest nations in terms of both people and area. President Bukele took a leap of faith and declared Bitcoin legal tender in 2021.

    El Salvador's adoption poses intriguing regulatory problems and opportunities, along with a number of other initiatives that vary from the useful (providing subsidies to rural Salvadorians via hot wallets) to the absurd (a volcano-fueled, planned metropolis shaped like the symbol for Bitcoin).

    Colombia

    One of the Latin American nations with the highest volume of Bitcoin trading is Colombia, which has hundreds of businesses and ATMs offering cryptocurrency services. The emergence of peace, a thriving but still expanding economy, and affordable energy are the driving forces behind this expansion. The Colombian government is enacting regulating rules in reaction to this growth to make sure that cryptocurrency users pay their taxes.

    The Financial Information and Analysis Unit of Colombia ordered bitcoin exchanges to record customer transactions by December 2021. Notably, starting on April 1, 2022, all Bitcoin transactions costing more than $150 require registration. A regulatory sandbox that Colombia has established allows exchanges and banks to collaborate.

    Mexico

    Politicians in Mexico are working harder to create a regulatory framework that is more favourable to cryptocurrencies. Some politicians have even proposed following El Salvador's lead and declaring Bitcoin legal money in order to strengthen the nation's economy and win over their rural, unbanked electorate. However, the government has said that cryptocurrencies are not now accepted as legal money.

    Mexico allows the operation of cryptocurrency exchanges and storage services with a licence. Companies must do know-your-customer (KYC) checks as well as offer descriptions of operations and personnel responsibilities in order to obtain this permission.

    Additionally, Mexico has said that it plans to establish a central bank digital currency (CBDC) before 2024. Some feel that this improvement has been too sluggish. For instance, the Mexican authorities thwarted the ambitions of billionaire Ricardo Salinas, who recently declared his desire to enable Banco Azteca to accept Bitcoin.

    Peru

    Peru is adopting a regulatory structure more slowly than other countries. The formation of a public register of crypto service providers to report what it labels "suspicious activity" has recently been put up for discussion. The nation does not yet have any intentions to recognise bitcoin as legal money.

    Conclusion

    Since most people can remember, a large portion of Latin America has suffered with poverty, corruption, and drug-related violence. Cryptocurrency offers solutions to some of these issues, but if it is not properly controlled, it might potentially make things worse. Although several nations in the area are moving in the right direction, there is still a long road ahead of them. The decisions made by South American legislators over the next several years will determine whether cryptocurrency proves to be a game-changer or just another weapon of corruption.

    As was already said, Latin America has shown greater interest than other areas in cryptocurrencies and digital assets. As a result, it has become important for the industry and citizens to understand the law and regulations governing these assets.

    Governments will need to decide whether they want to limit the ownership of cryptocurrencies to a percentage of total assets for an individual in order to maintain control over their currency inflows and outflows because many Latin American countries have volatile currencies and people have an incentive to keep their wealth in other assets (such as gold and digital assets).

    The first nation in the area to declare that Bitcoin will be accepted as legal money is El Salvador. The El Salvadorian government attached it to a wallet service to make it simpler for people to transact, further promoting adoption. Any nation that chooses this route, though, will have to deal with the uneasy circumstance of ceding control of its currency.

    Along with a young population that is becoming more connected online, several Latin American countries have relatively low penetration rates for traditional financial services. These nations now have a huge chance to use cryptocurrencies to promote greater financial inclusion. Development, per capita income, and GDP growth all have strong positive relationships with financial inclusion.

    Cryptocurrency Regulation FAQs

    Is there any regulation on cryptocurrency?

    Numerous government agencies oversee cryptocurrencies, but there is no overarching regulatory framework. This legal latitude allows for the rapid expansion and experimentation of the cryptocurrency industry, but it also allows for the unregulated use of dangerous methods that expose consumers to harm.

    What will happen if cryptocurrency is regulated?

    Regulation of bitcoin might significantly increase market security. Even while it will probably still be a dangerous investment, it is less probable that the market will be able to withstand as much outside manipulation because to investor safeguards.

    Who regulates cryptocurrency?

    The Office of the Comptroller of the Currency (OCC), which is in charge of overseeing the federal banking system, sets both the requirements for fintechs and other startups applying for banking licences as well as the cryptocurrency products that its banks make available.

    What country has no crypto laws?

    Therefore, regardless of whether you make money by selling or trading your cryptocurrency, you won't have to pay taxes on the gains made. Singapore is now one of the nations that do not tax cryptocurrency. The Singaporean government sees cryptocurrencies as intangible assets as well.

    Can the government stop crypto?

    Bitcoin is a decentralised currency that is not governed by any authorities. Governments may, however, impose restrictions on its use if they can demonstrate justification for doing so. To do this, lawmakers will need to enact legislation that forbids the use of Bitcoin as money.

    Can crypto be tax-free?

    Key financial organisations do not view cryptocurrencies as money or currency. Cryptocurrency holdings are viewed as shares for tax purposes and will be taxed as such.