Even though the idea of cryptocurrencies has been to provide financial independence to people, for worldwide adoption, crypto will require support from world governments. This is an important step since it allows digital assets to be seen not as a threat, but as a medium of improving the flaws in traditional banking. However, not every country is convinced by the use of crypto and Chile is one of them.
Chile’s Commission for the Financial Market [CMF] recently published a proposed Fintech Law for the stock market and it briefly mentions the case of digital assets. However, the mention in question was not with respect to existing or future regulations.
The draft said,
“It should be noted that this project does not include regulation of those digital assets that are used as a means of payment, a matter that the CMF is working together with the Central Bank.”
This suggests that the subject of digital assets is on the table in Chile. However, in light of Chile’s own chequered history, it might be prudent to be cautious and not too optimistic about these developments.
In 2018, the Chilean Supreme Court had ruled in favor of the state-owned bank, Bancoetado, after it closed down the accounts of cryptocurrency exchange, Orionx. This step was taken by the bank without any prior communication with the business. As per the ruling, the bank did not act in compliance with laws on money laundering and terrorism financing.
This ruling had significant implications for crypto-businesses across the country, while also empowering authorities like commercial banks to shut down exchange accounts without notice.
At the same time, it exempted crypto-assets from Value Added Tax laws by calling them “intangible assets.” However, fast forward to 2019, and investors were asked to pay tax on earnings generated from their crypto-related investments. Although the regulations were not made any clearer, this was seen as a step towards legitimizing the trade and use of digital assets.
While many exchanges and other businesses are actively working to boost crypto-adoption in South America, most governments on the continent have still maintained an indecisive stance with respect to regulations.
Nevertheless, the Chile government in April 2019 did move to regulate cryptocurrencies by proposing a bill. The Minister of Finance, Felipe Larrain, announced this by stating that regulations “will be applied in a proportional way, regulations according to the type of service provided, and the risks that are implied for users and for the financial market.”
With the CMF and the Central Bank still working on regulations, users and the businesses may have to be patient and careful to comply with the pre-existing norms in the country.