FinTechs belonging to this category offer financial services using crypto currencies. This category also includes FinTechs utilising blockchain and distributed ledger technologies (DLT) upon which Bitcoin and Ethereum are based, among others. FinTechs develop and do research in this field in order to create new services – e.g. crypto currency exchange markets, wallet providers, NFTs-related services, new payment services, "smart contracts" or new clearing and settling services.
Attitude of the country towards financial services using crypto currencies
Uruguay does not yet have any specific cryptocurrencies’ regulations in place; neither addressing the cryptocurrencies itself, nor the entities providing services or commercializing cryptocurrencies nor tax-related regulations. Because of this, the Uruguayan political system began to study the possibility of implementing a regulation of virtual assets. In September 2021 a draft bill was submitted to the Uruguay Congress that seeks to regulate the production and commercialization of virtual assets. Furthermore, on October 1st, 2019 , another draft bill was submitted to Parliament which seeks to create a minimum legal framework giving the CBU the power to regulate crypto assets in their various forms, including cryptocurrencies and crypto tokens, following the principles set forth in the Project.
Finally, the CBU has created an Innovation Office within the CBU which is analysing, among other things, the different aspects or issues of the virtual assets and the convenience or not to regulate them. This office has published a Conceptual Guideline for the Regulatory Treatment of Virtual Assets in Uruguay , which seeks to provide a conceptual framework aimed at understanding and categorizing the different instruments and their operations, in order to contribute to the analysis of a regulatory approach for virtual assets.
Obligations and requirements to provide financial services using crypto currencies described above
Uruguay does not have any specific cryptocurrency regulations in place; neither regulating the cryptocurrencies in itself, nor the entities providing services or commercializing cryptocurrencies nor tax-related regulations.
In particular, we note that the issuance and commercialization of cryptocurrencies as of today is a non-regulated activity.
Further, the CBU defines virtual assets very broadly, as follows: "the digital representation of value or contractual rights that can be stored, transferred and traded electronically through distributed ledger technologies (DLT) or similar". In addition, the CBU recognizes that cryptocurrencies are not considered as legal tender, such as the Uruguayan peso is, as they are not issued or are backed by any Central Bank.
Moreover, in August 2021 the Tax Authority (“Dirección General Impositiva”) ruled on the first real estate transaction with cryptocurrencies in Uruguay, through Consultation No. 6.419 where the Tax Authority sides with the CBU's position by understanding that cryptocurrencies do not clearly meet the conditions to be considered as money or electronic money. The Tax Authority concluded that the transaction should be considered as a swap and not as a purchase and sale, since as the cryptocurrency is not “money” (i.e.: fiat currency), it should be considered as an intangible asset, which is exchanged for a real estate asset.
Therefore, and in line with the above, the CBU has warned the general public that those who use the services of such service providers are not covered by the financial user protection measures which, in turn, do apply to other entities regulated and supervised by the CBU. However, even though the virtual assets and the issuance and commercialization activities are not regulated, operations could be covered by a CBU license.
Therefore, if the activities that are developed regarding cryptocurrencies resemble other regulated activities or have the purpose of achieving other objectives different from the mere exchange or transfer P2P of cryptocurrencies, then an analysis of whether such activity falls within any of the actual licenses or registries of the CBU must be done.
Finally, on the 27th of December 2021, the CBU Innovation Office published the Conceptual Guideline for the Regulatory Treatment of Virtual Assets in Uruguay (herein after, the "Guideline"), which seeks to provide a conceptual framework aimed at understanding and categorizing the different instruments and their operations, in order to contribute to the analysis of a regulatory approach for virtual assets (herein after, the "Virtual Assets") in our country.
The Guideline provides a series of different categories of Virtual Assets, distinguishing the different roles and functions linked to each type of Virtual Asset and seeks to determine the main actors involved, establishing the obligations to which they will be subject. It also analyses the potential risks and benefits for all actors involved in Virtual Asset activities.
The Guideline is based on a preliminary analysis of potential risks and benefits for users, the financial system and the CBU. It is important to note that the CBU considers that virtual assets could constitute an important source of risk for users, money laundering and terrorist financing, financial stability and the reputation of the CBU and Uruguay. Notwithstanding the risks, the CBU also recognizes the potential benefits of Virtual Assets.
Further, the Guideline discloses the strategy and regulatory approach that the CBU would be taking in the future. In this sense, the report states that the aim is to analyse the current legal framework and make the necessary legislative and regulatory amendments for the implementation of Virtual Assets operations that are understood to fall within the CBU's regulatory scope.
A number of definitions related to Virtual Assets are set out that emerge from the United Kingdom regulation and FATF. They are the following: Virtual Assets and their taxonomy (Virtual Assets, utility assets, stable assets, exchange assets); the different actors (Virtual Asset developers and issuers, Virtual Asset processors, Virtual Asset wallet and custody service providers, users, platforms, etc.). Further, the CBU introduces the Virtual Asset Service Provider (hereinafter the “VASP”) that stands out as the entity that habitually and professionally provides one or more Virtual Asset services to third parties.
The Guideline proposes to delimit the regulatory perimeter of the CBU in relation to Virtual Assets. In this regard, and given the wide variety of Virtual Assets that can be provided by a VASP, the CBU proposes an approach to regulate the different Virtual Assets categories. For example, the Utility Virtual Assets will not be regulated, but the regulation based on questions on the type of Virtual Assets they will be operating with, Virtual Asset Security will be regulated by the Securities Market regulations.
Further, with regards to licenses and authorizations, the CBU proposes different types of licenses depending on the Virtual Assets category. For example, the Virtual Assets Issuer entities that are not currently registered with the CBU and intend to engage in the issue Virtual Assets must apply for a license in accordance with the type of Virtual Assets to be issued. Another example are Virtual Assets Securities: the CBU proposes to regulate them through the Securities Market Law for issuers, and in the case of Stable Virtual Assets they will be consider as Electronic Money and the issuer would be included in the scope of Electronic Money Issuer under the Payment System Regulation, among other proposed regulations.
In the case of VASP, the entities that are not currently registered in the CBU and intend to provide Virtual Assets services on a regular and professional basis, the CBU suggest that they should apply for a VASP license.
Please note that the Guideline is not yet a CBU regulation, it is only a conceptual framework that the CBU will try to follow by implementing proposals for regulatory amendments in the near future.
Additional comments regarding the legal situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area
Our government and the CBU has taken a particular interest in regulating and promoting FinTech and different technological projects in the country regarding finance, through modern regulations and legislation, specifically through dispositions and regulations of the CBU and national laws. Such actions are planned to continue in the present year and in the near future.
Market size for financial services using crypto currencies and biggest companies in this business area
Additional comments regarding the economic situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area
As a general comment, it is possible that opening a bank account in Uruguay for companies linked to Virtual Assets may be difficult, as these are accounts in which third-party funds are managed, which entails higher requirements and costs for banks in terms of compliance (due to current regulations).