Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology

Colombia and Cryptocurrency

Colombia Cryptocurrency Laws

Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology

Colombia’s restrictive legal environment towards virtual currencies suggests it is challenging to operate a cryptocurrency business within the country. The Financial Superintendence of Colombia (SFC) has virtually prohibited banks from providing financial services to cryptocurrency companies. Consequently, cryptocurrency firms in Colombia may not utilize banking institutions. Furthermore, Colombian officials declared in 2014 that regulated financial institutions shall not possess or invest in cryptocurrencies. Consequently, cryptocurrency-related companies may not seek investments from regulated financial institutions. Accordingly, cryptocurrency-oriented businesses in Colombia must operate without the assistance of banking and financial institutions.

The country’s unfavorable legal environment has caused several cryptocurrency companies to go out of business. Precisely, some cryptocurrency enterprises ceased operations in response to Colombia’s anti-cryptocurrency regulations. For example, a cryptocurrency exchange named Colbitex lasted only a week before shutting down due to “authorities obstructing its operations.” Furthermore, Colombia’s warnings of the risks associated with virtual currencies have caused some crypto-related businesses to cease operations. In 2018, the SFC published documents highlighting the “risks” of cryptocurrency. Subsequently, an abundance of Colombian banks deactivated cryptocurrency-related accounts. These closures have been fatal to several cryptocurrency companies in Colombia, like the startup called Buda.com. In sum, Colombia’s warnings and anti-cryptocurrency regulations have made it impossible for several cryptocurrency-oriented companies to operate.

Classifications.

Colombia law has failed to provide a clear classification of cryptocurrency. Colombia’s central bank, Banco de la República, declared that cryptocurrencies are not classified as “legal tender.” This declaration is inconsistent with Colombian law considering cryptocurrency can act as a means of payment and can act as a “deposit of value” as well as a “unit of account.” According to Colombia’s regulations, cryptocurrencies also cannot be categorized as “money.” In addition, the Financial Superintendence of Colombia (SFC) proclaimed that cryptocurrencies are not classified as “currency.” Furthermore, cryptocurrencies are also not classified as “securities” under Colombia’s laws because they “have no value under capital market laws.” Consequently, cryptocurrencies may not be classified as legal tender, money, currency, or securities.

Additionally, the tax framework for cryptocurrency is unclear and contradictory because various Colombian agencies disagree as to how cryptocurrencies should be taxed. First, Colombia’s tax entity considers Bitcoin and other digital currencies as material goods. In contrast, the SFC considers cryptocurrencies as intangible assets, thereby subjecting them to income taxes. On the other hand, the Superintendence of Commerce declared that cryptocurrencies are considered valueless. These differences of opinion between Colombian agencies have provided a murky tax framework for cryptocurrencies.

In Colombia, cryptocurrencies are not taxed as “money” under the country’s legal standards. The tax model in Colombia is similar to Spain’s tax model. In Spain, cryptocurrencies are taxed as assets. In contrast, euros and US dollars are taxed as “money” by Spain’s tax authorities. Accordingly, cryptocurrencies in Colombia are not taxed as “money,” but as an “asset.”

Is Cryptocurrency Legal in Colombia?

Do you have questions about cryptocurrency, digital currencies, or blockchain technology? Freeman Law can help with digital currencies, tax planning, and tax compliance.   Contact us now or Schedule a consultation or call (214) 984-3410 to discuss your cryptocurrency and blockchain technology concerns.


WORKS CITED

Regulation of Cryptocurrency Around the World. (2014). Loc.gov. https://www.loc.gov/law/help/cryptocurrency/world-survey.php#:~:text=Cryptocurrencies%20are%20not%20legal%20tender,and%20demand%20of%20their%20market.&text=Fundraising%20using%20digital%20currencies%20is%20prohibited.

Erazo, F. (2020, March 15). Crypto Is Brewing in Colombia: Active Adoption That Will Wake You Up. Cointelegraph; Cointelegraph. https://cointelegraph.com/news/crypto-is-brewing-in-colombia-active-adoption-that-will-wake-you-up

López, M. (2020, June 12). Cryptocurrency regulation in Colombia encounters legislative delay. Contxto; Contxto. https://contxto.com/en/colombia/cryptocurrency-regulation-colombia/

Kuhn, D. (2019, September 5). Paxful Plans to Bring 20 Crypto ATMs to Colombia – CoinDesk. CoinDesk; CoinDesk. https://www.coindesk.com/paxful-brings-20-crypto-atms-to-colombia

 

Regulation of Cryptocurrency Around the World. (2014). Loc.gov. https://www.loc.gov/law/help/cryptocurrency/world-survey.php#:~:text=Cryptocurrencies%20are%20not%20legal%20tender,and%20demand%20of%20their%20market.&text=Fundraising%20using%20digital%20currencies%20is%20prohibited.

Criptoactivos. (2017, October 6). Banco de La República (Banco Central de Colombia). https://www.banrep.gov.co/es/publicaciones/documento-tecnico-criptoactivos

Latam.tech. (2020, September 8). The rise of cryptocurrencies in Colombia. Colombiafintech.co; Latam.tech. https://www.colombiafintech.co/novedades/fintechthe-rise-of-cryptocurrencies-in-colombia

Erazo, F. (2020, March 15). Crypto Is Brewing in Colombia: Active Adoption That Will Wake You Up. Cointelegraph; Cointelegraph. https://cointelegraph.com/news/crypto-is-brewing-in-colombia-active-adoption-that-will-wake-you-up

López, M. (2020, June 12). Cryptocurrency regulation in Colombia encounters legislative delay. Contxto; Contxto. https://contxto.com/en/colombia/cryptocurrency-regulation-colombia/

Kuhn, D. (2019, September 5). Paxful Plans to Bring 20 Crypto ATMs to Colombia – CoinDesk. CoinDesk; CoinDesk. https://www.coindesk.com/paxful-brings-20-crypto-atms-to-colombia

Is cryptocurrency legal in Colombia?

Do you have questions about cryptocurrency, digital currencies, or blockchain technology? Freeman Law can help with digital currencies, tax planning, and tax compliance.   Contact us now or Schedule a consultation or call (214) 984-3410 to discuss your cryptocurrency and blockchain technology concerns.