Colombia’s cryptocurrency bill seeks to provide a ground of legal security for the industry25/11/2018
Considering that last year the cryptocurrency market was valued in USD 540 million, it is easy to see why this industry has multiplied its growth in Colombia at an alarming speed, in fact, even cryptocurrency ATMs have been installed in three different cities. Despite this, until now Colombian institutions have failed to provide legal security for cryptocurrency operators and acquirers.
To emend this situation, Congress is discussing a cryptocurrency bill, which also addresses the use of blockchain technology. Once the bill is finally issued, Colombia will become the first south american country officially recognizing the use of cryptocurrencies in the local financial environment.
In order to be a cryptocurrency trader or an entity performing cryptocurrency operations, it will be imperative to obtain an authorization issued by the Ministry of Information Technologies and Communications, and celebrate a formal agreement. Any individual that performs operations as a trader without obtaining the respective authorization, will be receive a penalty for over 35.000 USD.
In the same way, legal entities or companies that perform cryptocurrency operations without obtaining the respective authorization can be both shut down and be charged with a penalty for over USD 240.000
The regulation will require that companies that perform cryptocurrency operations must provide all the relevant information for acquirers, which includes declaring that cryptocurrency is not endorsed by Colombia’s government, that the operations performed cannot be reversed, that the market and value of cryptocurrency are volatile and that there are technological, cibernetic and fraud related risks that are incidental to these operations.
In fact, to minimize the risks these entities must develop and implement an Asset Laundering and Financing of Terrorism Risk Administration System (SARLAFT) approved by Colombia’s Financial Information and Analysis Unit.
As for taxes, each cryptocurrency operation that involves at least one party within Colombian territory will be taxed with 5% of the final transaction value.
Also, as it was stated before, the bill refers to blockchain technology defining it as “a database distributed and conformed by chains in blocks, which is designed to avoid its modification, after making the publication of a data using a reliable timestamp, which is linked to one of the blocks in the chain”.
Even when the bill makes no further mention to this technology, it is relevant to mention that Blockchain technology is currently being impulsed by Ministry of Information Technologies and Communications for being used in financial operations, acces and handling of information and even in government's judicial records, which could explain why Colombia is the 2th country in South America on digits of blockchain application.
Once the bill is issued and all its dispositions are enforced, both existing and new operators must fully comply with it in order to perform their regular activities. Still, with the new legal ground, it is expected that the virtual money’s traffic increases over time, opening the doors to a new financial era.