In a significant policy shift, the Banco Central de Bolivia has lifted its ban on cryptocurrency transactions, permitting financial institutions to engage with digital assets as part of an initiative to modernize its payment systems.
This move, effective June 26, ends a prohibition on crypto use dating back to 2014, signaling Bolivia’s intent to rejuvenate its faltering economy and harmonize with broader Latin American cryptocurrency regulations.
Historical Context
Previously, under Board Resolution N°144/2020 issued in December 2020, Bolivian banking entities were barred from any interactions with cryptocurrencies.
However, the recent legislative overhaul allows these institutions to engage in cryptocurrency transactions through authorized electronic channels, although it stops short of recognizing cryptocurrencies as legal tender.
As a result, while businesses may trade in digital assets through banks, there is no mandate for companies to accept them as payment.
Source: Banco Central de Bolivia
Edwin Rojas Ulo, president of the central bank, declared that this new decision will provide the population with an “additional mechanism that will contribute to the strengthening of financial and commercial activities.”
Nonetheless, the institution clarified that the boliviano (BOB) was the only legal currency in the country and that these digital assets were neither legal tender nor cash. This means that users of these crypto assets will have to deal with the risks associated with using and commercializing them.
The Central Bank of Bolivia is also set to roll out an Economic and Financial Education Plan aimed at raising public awareness about the potential risks and responsible management of cryptocurrencies.
This initiative underscores a cautious approach, balancing the embrace of innovative technologies with safeguarding consumers.
Regional Trends on Cryptocurrencies
The updated regulations were drafted in collaboration with the Financial Investigations Unit and the Financial System Supervisory Authority, aligning with recommendations from the Latin American Financial Action Task Force.
This alignment not only positions Bolivia as part of the growing list of Latin American nations adopting cryptocurrency measures to bolster economic prospects but also highlights the regional trend towards integrating digital assets into mainstream financial strategies.
Latin America has increasingly turned to cryptocurrencies as a solution to economic challenges, including persistent inflation and economic instability. Several countries in the region have adopted varying stances on cryptocurrencies based on their specific economic landscapes.
El Salvador led the way as the first, and so far only, country globally to recognize Bitcoin as legal tender alongside the U.S. dollar in 2021. This pioneering move was aimed at enhancing financial inclusion and stimulating economic growth.
El Salvador’s Bitcoin holdings. Source: Bitcoin Office
Meanwhile, Mexico, while not recognizing cryptocurrencies as legal tender, permits their use for value transfers and payment purposes. The country has also implemented taxation measures on profits derived from cryptocurrency transactions on centralized exchanges.
Similarly, Brazil has introduced income tax regulations on crypto profits, imposing a 15% tax, reflecting an increasing acceptance and integration of digital currencies into its financial system.
Argentina has followed suit, influenced by El Salvador’s example, electing a pro-Bitcoin president amid efforts to combat severe inflation. This decision underscores a regional shift towards leveraging cryptocurrencies as a strategic response to economic adversity.
Collectively, these developments indicate a significant shift in Latin America’s financial landscape, with Bolivia now joining its neighbors in the strategic embrace of digital assets to fortify economic stability and foster a modernized financial sector.
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