A Guide to Anti-Money Laundering for Crypto Firms

Latin America Cryptocurrency Regulations

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Is Cryptocurrency Legal in Latin America?

  • Cryptocurrencies: Laws vary by country
  • Cryptocurrency exchanges: Regulation, laws vary by country

Latin America cryptocurrency regulations run the legislative spectrum. Those countries with harsher regulations include Bolivia which has comprehensively banned cryptocurrencies and exchanges, and Ecuador which has issued warnings on the use, investment, and circulation of all cryptocurrencies apart from the government-issued “SDE” token (a form of e-money pegged to the USD). By contrast, in Mexico, Argentina, Brazil, Venezuela and Chile, cryptocurrencies are commonly accepted as payment by retail outlets and merchants. For tax purposes, cryptocurrencies are often treated as assets: they are broadly subject to capital gains tax across the region while transactions in Brazil, Argentina, and Chile are also subject to income tax in some contexts.Cryptocurrency Regulations Latin America

Latin America Cryptocurrency Exchange Regulations

Cryptocurrency exchange regulations in Latin America vary by country although many jurisdictions have no specific laws governing cryptocurrency trade beyond the scope of existing legislation. The degree of variation reflects the acceptance and licensing requirements needed to operate an exchange or accept cryptocurrencies or digital assets across the region. The lack of regulation combined with high adoption rates has made parts of Latin America an attractive option for businesses looking to capitalize on the interest in virtual currencies.

While there is a broad regional regulatory agreement that cryptocurrencies lack legal tender status, many Latin American countries have developed divergent views. This disparity has led to friction between and within the region’s traditional banking industries and prompted some banks in Chile to close accounts held by cryptocurrency exchanges in late 2018. Subsequent court rulings have offered short-term protection to these exchanges but it is clear that more definitive guidelines are needed.

In contrast to other Latin American countries, Mexico does, to an extent, regulate cryptocurrency exchanges through the Law to Regulate Financial Technology Companies. The law extends Mexican AML regulations to Latin America cryptocurrency services providers by imposing a variety of registration and reporting requirements.

Future Cryptocurrency Regulations

Many Latin American countries have expressed concern about the effect of cryptocurrencies on financial stability and their associated money laundering and sanctions risks. Beyond issuing official warnings, however, most financial authorities across the region are still developing their positions and have not revealed plans for any significant future Latin America cryptocurrency regulations.

However, some exceptions have emerged: Chile, for example, introduced draft cryptocurrency legislation in April 2019 but has offered scant detail on the legislation since – or what it will do if it comes into effect. In 2020, working with crypto exchanges, Colombia introduced a sandbox test environment for cryptocurrencies, before Brazil’s Securities Commission and its Central Bank did the same. The respective cryptocurrency sandbox programs are intended to help firms try out their business models while legislation is being drafted.

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Is Cryptocurrency Legal in Latin America?

  • Cryptocurrencies: Laws vary by country
  • Cryptocurrency exchanges: Regulation, laws vary by country
Latin America cryptocurrency regulations run the legislative spectrum. Those countries with harsher regulations include Bolivia which has comprehensively banned cryptocurrencies and exchanges, and Ecuador which has issued warnings on the use, investment, and circulation of all cryptocurrencies apart from the government-issued “SDE” token (a form of e-money pegged to the USD). By contrast, in Mexico, Argentina, Brazil, Venezuela and Chile, cryptocurrencies are commonly accepted as payment by retail outlets and merchants. For tax purposes, cryptocurrencies are often treated as assets: they are broadly subject to capital gains tax across the region while transactions in Brazil, Argentina, and Chile are also subject to income tax in some contexts.Cryptocurrency Regulations Latin America

Latin America Cryptocurrency Exchange Regulations

Cryptocurrency exchange regulations in Latin America vary by country although many jurisdictions have no specific laws governing cryptocurrency trade beyond the scope of existing legislation. The degree of variation reflects the acceptance and licensing requirements needed to operate an exchange or accept cryptocurrencies or digital assets across the region. The lack of regulation combined with high adoption rates has made parts of Latin America an attractive option for businesses looking to capitalize on the interest in virtual currencies. While there is a broad regional regulatory agreement that cryptocurrencies lack legal tender status, many Latin American countries have developed divergent views. This disparity has led to friction between and within the region’s traditional banking industries and prompted some banks in Chile to close accounts held by cryptocurrency exchanges in late 2018. Subsequent court rulings have offered short-term protection to these exchanges but it is clear that more definitive guidelines are needed. In contrast to other Latin American countries, Mexico does, to an extent, regulate cryptocurrency exchanges through the Law to Regulate Financial Technology Companies. The law extends Mexican AML regulations to Latin America cryptocurrency services providers by imposing a variety of registration and reporting requirements.

Future Cryptocurrency Regulations

Many Latin American countries have expressed concern about the effect of cryptocurrencies on financial stability and their associated money laundering and sanctions risks. Beyond issuing official warnings, however, most financial authorities across the region are still developing their positions and have not revealed plans for any significant future Latin America cryptocurrency regulations. However, some exceptions have emerged: Chile, for example, introduced draft cryptocurrency legislation in April 2019 but has offered scant detail on the legislation since - or what it will do if it comes into effect. In 2020, working with crypto exchanges, Colombia introduced a sandbox test environment for cryptocurrencies, before Brazil’s Securities Commission and its Central Bank did the same. The respective cryptocurrency sandbox programs are intended to help firms try out their business models while legislation is being drafted. [cta_card title="AML Handbook for Crypto Firms" cta_img="" category="" bodytext="Claim your practical, hands-on resource for financial compliance professionals working in crypto." cta_text="Download my copy today" cta_url="https://complyadvantage.com/insights/crypto-aml-guide/#access-form"]

Originally published July 6, 2018, updated June 10, 2022

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