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Bitcoin Law of El Salvador, Change of trends in definitions of crypto assets of the central banks of Latin America?

We are at a critical moment. Many jurisdictions worldwide are carrying out some regulatory process in the face of the advancement of crypto assets, but is there a cross-sectional definition of crypto assets that allows us to understand from what point of view this regulation is being approached in the region?

It is important to first understand how crypto assets are defined in different jurisdictions to appreciate from what point of view they are approaching it; This is essential to lay the foundations for a regulation that will arrive yes or yes, but with the hope that it will allow the development and innovation of the ecosystem.

On the one hand, we have a country to stand out in Latin America, El Salvador, the first country to create a Law to add Bitcoin as legal tender along with the US dollar. That is, it gives legal acceptance to the foundation of Bitcoin, which is to be a payment network, person to person without financial intermediaries, through its technology. This is a totally different approach from what is being carried out in the rest of the countries of the world.

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According to the OECD, regulators and researchers generally consider the term “crypto-assets” to cover three main categories of digital financial assets, which are based on Distributed Ledger Technology (DLT). These categories are “payment tokens” (also known as cryptocurrencies or virtual currencies), “utility or consumer tokens” and “asset, financial or security tokens”.

Considering that the OECD separates crypto assets into 3 different types, this differs from the definitions that different central banks in the region have established. On the one hand, the Fintech Law of Mexico (the first of its kind) speaks of virtual assets, where in part of its definition it establishes that “The representation of value registered electronically and used among the public as a means of payment for all types of legal acts and whose transfer can only be carried out through electronic means.” On the other hand, the Central Bank of Chile establishes that “… Its functions can be varied and include both those of representing a security, understood, for example, as a right over the equity of its issuer; such as trying to be used as a means of payment and serving functions similar to those of money. “ Finally, the Central Bank of Colombia indicates that “…their issuance and security protocols are quite opaque, their prices are highly volatile, consumer and investor protection in these schemes is questionable and they have limited acceptance. “

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There are several global institutions that have been working with the concept of crypto assets, such as the BIS (International Settlement Bank), the Financial Stability Board (FSB), the group of 20 (G20), the Bank of Canada, the Central Bank of England, among others.

Although all these definitions differ from each other, there are some points in which they are similar, especially in the aspects related to being a means of payment, but their high “volatility and risk” do not allow it to be accepted.

El Salvador will be key to this point. Many eyes are on the Central American country for adopting Bitcoin as legal tender, or as defined by the OECD, a payment token.

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Having said the above, from my point of view I believe that the definition of cryptoactive from where all regulation should start should be the one considered by the OECD when separating it into 3 types such as payment, utility and financial assets or securities.

However, as stated above, this separation is not the same as the main central banks in Latin America are using. We hope, then, that with the implementation of the Bitcoin Law of El Salvador this can be changed and seek a transversal definition in the treatment of crypto assets to seek regulations that promote innovation and development based on the 3 types defined by the OECD.

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Cristobal Pereira, CEO of LatamTech Finance, Instructor at Blockchain Academy Chile and Coordinator of the Blockchain Summit Latam.*

The opinions expressed are solely the responsibility of their authors and are completely independent of the position and editorial line of Forbes Mexico.

Tammy Sewell is our Writer and Social at OICanadian.com. Tammy loves sports, she writes our celebrities news. She spends time browsing through several celebs news sources as well the Instagram. Email: [email protected] Phone: +1 513-209-1700

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