In recent times, cryptocurrency usage has skyrocketed globally. More countries are creating regulations guiding cryptocurrency usage, mining, crypto exchanges, etc.
The regulations guiding cryptocurrencies in different countries vary based on how the government views them. For example, El Salvador is pro-cryptocurrencies, even legalizing bitcoin and making it legal tender.
According to statistics, Latin American countries have the highest number of cryptocurrency users.
The statistics stated that the “top countries with cryptocurrency users are Brazil, Colombia, Argentina, Mexico, and Chile.
18% of all cryptocurrency usage in Latin America comes individually from Brazil and Colombia.
16% of all cryptocurrency usage in Latin America comes from Argentina. 16% of all cryptocurrency usage in Latin America comes from Mexico. 11% of all cryptocurrency use in Latin America comes from Chile.”
This article explores the usage of cryptocurrencies in Latin America and their legality in those regions.
What Are Crypto Regulations In Latin America?
Latin American countries have different crypto regulations based on how they perceive blockchain technology.
Countries such as Bolivia imposed strict regulations, including prohibiting crypto usage and barring crypto exchanges from operating in the region.
Some countries favour cryptocurrencies, such as El Salvador, which made bitcoin legal tender and created a haven for crypto companies to build. Venezuela has allowed people and merchants to accept cryptocurrencies as payment.
The third group of countries issued warnings concerning the usage of cryptocurrencies. An example is Ecuador, which stated that residents should be careful while utilizing and investing in cryptocurrencies. Only government-issued tokens are considered legal.
Latin American Countries And How They View Cryptocurrencies
Panama
Panama has expressed interest in cryptocurrency adoption. The government is considering several crypto bill proposals, the most important of which is “The Crypto Law.” This law, if passed, would allow residents to purchase regular items using cryptocurrencies. Only major cryptocurrencies such as Ether, Bitcoin, Litecoin, XRP, and Stellar will be permitted for conducting everyday transactions in the country.
Gabriel Silva, a Panamanian Congressman, is at the forefront of this bill, having assisted in drafting it in a bid to transform the country into a centre of technology and innovation. The bill aims to turn cryptocurrencies into an alternative form of payment in several areas in Panama.
Cenobia Vargas has also submitted a crypto bill requesting that the Panamanian congress regulate the usage of different digital assets. The National Assembly recently passed Bill No.697, which “regulates the commercialization and use of crypto assets, issuing digital value, the tokenization of precious metals and other goods, payment systems, and also dictates other provisions.”
Bolivia
Bolivia is at the polar end of the crypto adoption spectrum, having banned the use of any cryptocurrency in the country.
Cryptocurrencies were prohibited in order to protect citizens from the risks associated with them.
Residents are not permitted to use cryptocurrencies, invest in them, trade them, or use crypto exchanges.
Paraguay
Paraguay is taking a friendly approach to regulating cryptocurrencies in the country. At the time of writing, the Paraguayan Senate is debating a proposal.
The bill aims to protect the interests of residents when they use crypto-related platforms. If the bill is passed, there will be some guidelines that crypto exchanges and similar platforms have to follow before operating in the country. Companies will be expected to register and obtain the necessary license from the Registry of Virtual Asset Providers. This is done to mitigate the risks associated with the cryptocurrency space.
It is important to note that the bill does not legalize cryptocurrencies as a competitor tender to fiat currency.
Once passed into law, a crucial component of the bill will be to attract crypto miners to the country, as the government will offer incentives and rewards to those who set up mining farms.
Ecuador
Ecuador has not outrightly banned or accepted cryptocurrencies; the government seems to be sitting on the fence. However, the government has cautioned residents about the risks associated with cryptocurrencies.
According to Guillermo Avellán, the manager of Banco Central del Ecuador (PIB) stated,
“The Central Bank is working on a project to regulate cryptocurrencies, bearing in mind that the Monetary Code establishes that the dollar is the only legal tender in the country. But we are working on a regulation to be submitted to the Monetary Board for review and approval. This regulation does not imply that cryptocurrencies are going to become legal tender, as happened in El Salvador, but they are a reality and we cannot be on the sidelines of that. We must keep in mind that cryptocurrencies are an investment asset, but given their high volatility, it is very complicated to consider them as legal tender.”
El Salvador
El Salvador was one of the first countries to adopt Bitcoin as legal tender, which elicited mixed reactions from different quarters. For some, this was a step in the right direction, while others thought El Salvador made the wrong decision.
According to DeFi Planet, “to increase the adoption of Bitcoin within the country, the government has started some processes like installing crypto ATMs. With these ATMs, people can easily convert their BTC to USD or vice versa without paying outrageous fees. The government has also created a digital wallet, which they actively promote to their citizens. “
Bitcoin is a legal tender used to purchase regular items in the country. The government introduced subsidies for residents that purchased petrol using Bitcoin.
DeFi Planet reported that “Bukele stated that residents who decide to buy gasoline with BTC would be rewarded with a subsidy of $0.20 per gallon. To benefit from this incentive, the locals have to make use of Chivo, the government-backed Bitcoin wallet. “
The International Monetary Fund (IMF) criticized El Salvador’s President, Nayib Bukele’s decision. The United States Congress was similarly opposed to the country adopting Bitcoin as legal tender, partly because El Salvador already utilized USUS dollars as legal tender.
DeFi Planet reports that “Republican Senators Bill Cassidy and Jim Risch introduced this bill to Congress, which was signed by a Democrat Senator, Bob Menendez.”
The proposed Accountability for Cryptocurrency in El Salvador (ACES) Act seeks to “mitigate potential risks to the US financial system,” such as terrorism and money laundering.
Venezuela
Venezuela has shown interest in cryptocurrency for a variety of reasons. First, the Venezuelan government became interested in cryptocurrencies to circumvent sanctions imposed by other countries, such as the United States.
Second, the country intends to regulate this digital asset while offering citizens an opportunity to earn cryptocurrencies through mining. Unofficially, people regard Bitcoin as legal tender, especially since the fiat currency has been drastically devalued.
In 2018, the authorities decided to issue a cryptocurrency called Petro, which would be used in the country for daily transactions. At the time of its creation, the cryptocurrency was envisioned as a legal tender based on oil prices. In actuality, the central bank determined the value.
Before any crypto-related company can operate in Venezuela, it must register and obtain a license from the Comprehensive Registry of Crypto Active Services (RISEC). Mining is permitted in the country only if miners are licensed by the regulatory agency, the Integral Registry of Miners (RIM).
In Conclusion,
- Crypto regulations in Latin America vary depending on how the country views this technology.
- Countries such as Bolivia have taken a tough stance against cryptocurrencies. The Bolivian government enacted stringent regulations to ban cryptocurrency use and prohibit crypto exchanges from operating in the region.
- Some countries, such as El Salvador, are pro-cryptocurrencies, making bitcoin legal tender and trying to create a haven for crypto companies to build.
- The third group of countries has issued warnings concerning the usage of cryptocurrencies. Ecuador, for example, warned residents to be careful while utilizing and investing in cryptocurrencies.
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