Some of the warnings made by the Colombian Finance Superintendency is that the transactions on the virtual currencies platforms are anonymous. As per Colombian authorities, cryptocurrencies generate serious risks mainly related to consumer protection, money laundering, tax evasion and financial stability. Buyers or sellers of these virtual currencies are exposed to operational risks, mainly because digital wallets are stolen, as has already happened, and unauthorized or incorrect transactions cannot be reversed. People who deal with virtual currencies are not covered by any type of private or State guarantee, nor their operations are eligible for coverage by deposit insurance. Those who accept virtual currencies in their operations must consider that their acceptance could cease at any time, since people are not legally obliged to trade or to recognize them as a means of payment. There are no mechanisms to enforce transactions with virtual currencies, which significantly increases the possibility of materializing a default risk.
There is not yet regulation on virtual currencies in Colombia. In any case, there are no explicit restrictions on virtual currencies in Colombia as well. Cryptocurrencies are not recognized nor supported by the Colombian State nor are they part of a centralized, controlled or monitored system. In addition, the Colombian Central Bank, as monetary, credit and exchange authority in Colombia, stated the following:
- The only monetary unit in Colombia is the Colombian peso (bills and coins) issued by the Colombian Central Bank.
- Bitcoin or similar cryptocurrencies are not legally recognized in Colombia. Therefore, they do not constitute a means of payment of legal tender with unlimited liberating power. There is then no obligation to receive it as a means of compliance with obligations.
- Cryptocurrencies cannot be used for exchange market transactions.
In addition, the Colombian Finance Superintendency stated that the entities subject to its surveillance (e.g. commercial banks) do not have authorization to guard, invest, distribute or intermediate with cryptocurrencies.
Even if there is no regulation, cryptocurrencies are taking a big step into Colombian Economy. It has been stated by the National Tax Authorities and Citi Research that cryptocurrencies have spiked up the economy and are about 2% of Colombia´s GDP. The sales of cryptocurrencies have taken place online and most websites have an international IP address, therefore no known transactions are taking place in Colombia. For the moment, the national control bodies warn of the risks to which all those wishing to enter this business model are exposed. The Colombian Finance Superintendency, reported in September 2017, that the entity was studying, together with the Colombian Central Bank and the Ministry of Finance, if cryptocurrencies should be regulated or not. Yet, there are no signs that these currencies would be regulated soon.
Existing regulation does not prevent from investing in these cryptocurrencies but still there many issues surrounding this new ecosystem which are uncertain and unclear. Colombian Government stated that it is up to each person to know and assume the risks involved in this business.
Alvaro Parra Gómez
Bernardo Rodríguez Ossa