Cryptocurrencies and blockchain regulation in Colombia

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The Financial Superintendence of Colombia

Is the supervisor in charge of supervising the financial markets in Colombia.

The Financial Superintendency has issued several circulars.

 

Circular Letter 29 of 2014 in a nutshell

-Cryptocurrencies are not legal currency in Colombia.

-Law 31 of 1992 establishes that the peso is the only means of payment of legal tender with unlimited release.

 

Bitcoin is not an asset that is equivalent to the legal currency of legal tender in Colombia because it has not been recognized as a currency in the country.

 

Cryptocurrencies are not considered legal tender in Colombia

Cryptocurrencies cannot be considered a currency. This is in accordance with the criteria of the International Monetary Fund.

They also do not have the support of the central banks of other countries. Therefore they do not have unlimited liberating power for the extinction of obligations.

Cryptocurrencies cannot be used in the operations referred to in the Exchange Regime contained in External Resolution No. 8 of 2000 of the Board of Directors of the Bank of the Republic.

 

Cryptocurrencies may not be considered legal tender susceptible of cancelling debts.

 

 

Transactional platforms, and virtual currency traders

They are not regulated by Colombian law. Nor are they subject to the control, surveillance or inspection of this Superintendency. Therefore, such platforms may not have safe and risk mitigation standards or processes.

The FS also refers to the famous “MT. Gox” case, one of the known virtual currency transactional platforms, which closed in 2014, and generated heavy losses to users. This platform was one of the first to close in the world crypto and bitcoin.

 

Transactional platforms are domiciled in multiple jurisdictions

So that their regulation and surveillance also escapes the scope of Colombian law. Likewise, the counterparties of the transactions may not be subject to national jurisdiction.

 

Other circulars of the Financial Superintendence of Colombia

In similar terms we can cite the CIRCULAR LETTER 78 OF 2016 (November 16), and CIRCULAR LETTER 52 OF 2017 (June 22) of the Financial Superintendence of Colombia.

The SF called on persons to become informed and assume the risks related to virtual currencies. These currencies do not have any private or state guarantee.

 

 

Bank of the Republic

In Concept No. 20348 of 2016 they indicated that the only means of payment of legal tender in the country is the Colombian peso.

Cryptocurrencies are an asset that cannot be considered a currency. They cannot be used for the payment of the operations of the exchange regime (Concept No. 20348, 2016).

 

The SF further emphasized that the Colombian peso is the only legal currency, and that the Banco de la República has the exclusive authority to issue money in Colombia.

 

Additionally, the Bank of the Republic as a monetary, credit and exchange authority in Colombia, ruled on this type of currency through official letter GG2105 of September 29, 2016, stating the following:

-No virtual currency (MV) including Bitcoin has been recognized as currency by the legislator or by the monetary authority.

-Cryptocurrencies do not constitute an asset equivalent to the legal tender, it lacks unlimited release power for the extinction of obligations.

 

 

Mining activity of cryptocurrencies in Colombia

The Directorate of National Taxes and Customs (DIAN), in Concept No. 20436 of 2017, they indicated that mining activity is taxed through income.

It implies an investment in both equipment and electrical energy, allowing the obtaining of a good that involves the registration of digital information, which is attributed value by consensus, among the participants of the network.

Reason why the proceeds from mining, in cryptocurrencies, must be declared for rent.

 

 

The Financing Law (Law 1943 of 2018)

It established that companies involved in the development of technological value-added industries, and creative activities, which meet the requirements established in article 235-2, have a tax incentive exempt from income for a term of seven years . So companies that develop mining activities could take advantage of this benefit.

 

 

Accounting aspects related to cryptocurrencies

There has been no further development regarding the application of International Financial Reporting Standards (IFRS).

The Technical Council of Public Accounting in Colombia (CTCP), through Concept 977 of 2017, stated that it is clear that cryptocurrencies are not cash or money equivalent.

But they could be treated as an inventory commodity or a financial asset as a contractual right to receive cash.

 

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