Brown Rudnick LLP

04/02/2024 | News release | Distributed by Public on 04/02/2024 14:33

Are You Based in LatAm and Would like to Learn about Cryptocurrency Adoption in the Region? Clara Krivoy long arrow

Cryptocurrency adoption in Latin America has been notable for various reasons, ranging from growing interest in digital innovation and financial inclusion in some countries to economic instability and high inflation in others.

Countries with a high volume of international remittances, such as El Salvador, have used cryptocurrencies as a cost-effective way to allow remittances to be sent with reduced transaction fees and the time it takes to complete them, while other countries, such as Argentina, have identified cryptocurrencies as a means to preserve wealth against currency depreciation. To learn about how to issue digital assets in the U.S., or to U.S. persons, you can read Brown Rudnick's article on that topic by clicking here.

The regulatory environment for cryptocurrencies varies significantly across Latin American countries. Below you will find the guidelines being followed by some countries in the region:

  • Argentina does not have specific laws regulating cryptocurrencies; however, it recognizes and treats them as goods under its tax code, and as a result are subject to income tax. Despite the lack of a formal regulatory framework, the country has an open stance toward crypto. The government currently considers creating a mandatory registry for those operating with digital assets in the country.
  • Brazil has taken steps to recognize and regulate digital assets as a financial asset class. In July 2023 the Central Bank was entrusted with overseeing and regulating all digital asset providers. Additional laws involving the tokenization of assets and launching an official digital currency are being considered in Brazil.
  • Although Chile doesn't have laws regulating digital assets, the country's tax authority requires individuals and businesses to report their crypto earnings for taxation purposes, and the use of cryptocurrencies is generally allowed.
  • Colombia does not have laws regulating cryptocurrencies; however, its financial authorities have issued warnings about the risks associated with crypto trading, and the country seeks to create a supportive regulatory framework for cryptocurrencies.
  • In September 2021 El Salvador became the first country in the world to adopt Bitcoin as legal tender. As a result, Bitcoin is used alongside the U.S. dollar (the country's official currency) for all transactions, and businesses are required to accept Bitcoin in their day-to-day operations.
  • Mexico was one of the first countries in Latin America to regulate fintech and cryptocurrencies, with its Fintech Law being approved in 2018. This law provides a legal framework for digital financial services, including digital assets, and requires crypto exchanges to obtain a license from the Mexican financial authorities.
  • Other countries in the region are in various stages of evaluating and implementing cryptocurrency regulations with a view to protecting investors and preventing fraud while fostering innovation and financial inclusion.

In addition to cryptocurrencies, Distributed Ledger Technology (DLT) is being adopted across Latin America for its ability to enhance transparency, improve efficiency and reduce costs. Some countries in the region have used, or are considering using DLT, for multiple purposes.

  • Financial Sector Remittances and Payments: Latin American countries with a high volume of cross-border remittances are using DLT to reduce transaction costs and the time it takes to complete them. For example, Ripple, a DLT payment protocol, has partnered with financial institutions in Brazil, Chile, Colombia, Mexico, Peru, Argentina and Uruguay to facilitate faster and cheaper international transactions.
  • Banking Innovation: Banks across the region are using DLT to improve the efficiency and security of internal processes, including compliance, Know Your Customer (KYC) procedures as well as preventing money laundering and illicit financing. Santander and BBVA are examples of banks that have launched blockchain-based services in the region.
  • Registry and Identity Management: Some Latin American countries, such as Colombia, are considering the use of DLT to maintain secure and transparent public registries, including land registries and identity systems.
  • Energy Sector: Countries like Chile use DLT to record and transact energy usage data more efficiently. This has implications for both large-scale renewable energy projects as well as small-scale distributed energy resources.

DLT's potential for transparent and secure voting systems, smart contracts as a tool to reduce corruption and increase efficiency in public procurement processes, and DLT as a means to improve supply chain transparency and traceability, are being considered by several countries in the region.

The adoption of cryptocurrencies and other forms of DLT in Latin America presents a path to achieve financial inclusion, public sector transparency, and efficient business processes. On the other hand, regulatory uncertainty and the need for technological infrastructure present challenges to widespread adoption. To learn how to invest in, or transact with, cryptocurrencies, you can read Brown Rudnick's article on that topic by clicking here.

If you are interested in learning more about the outlook, trends, challenges and opportunities for the blockchain and crypto-asset industry please join Brown Rudnick's Global Blockchain Conference in New York on April 18, or contact us. Our team of international lawyers, many of whom are admitted to practice law in Latin American countries, can assist you as you look to integrate blockchain as a strategic component in your business endeavors.