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The Dominican Republic, which is located on the Island of Hispaniola in the Caribbean, is a nation, which is popular for its culture, landscape and economy. In terms of population as well as area, it is the second largest in the Caribbean region. It has over 11.4 million people. Interestingly, of this 11.4 million, as many as 3.6 million people live in its capital city, Santo Domingo. Notably, the country also has the largest economy in the region. It has witnessed impressive growth in the past few decades. The growth has been contributed by various key sectors like construction, manufacturing, tourism and mining. But, this does not mean that it is better than other Latin American countries. It is also a poor performer when it comes to unemployment and income inequality, like similar Latin American economies. The biggest economic and political crisis it is facing right now is Migration. Anyway, what stands as a backbone of the Dominican Republic economy is its large diaspora in the United States, which contributes significantly to the economy in the form of foreign remittance. All these factors make the country a perfect destination for the introduction of a crypto revolution. Right now, the Dominican Republic crypto sector presents a mixed picture at present. The country does have an active crypto community. But, from a regulatory standpoint, the Central Bank of the Dominican Republic has expressed caution. Recently, it issued statements, aimed to discourage people and financial institutions from dealing with cryptocurrencies. As per the central bank’s position, the cryptocurrencies are not government-backed. Sadly, it even threatened financial institutions with potential penalties. Despite these reservations, there is something which keeps the hopes of people alive. That is the local community support the cryptocurrency sector enjoys right now. As per a recent report, the local crypto market in the Dominican Republic continues to thrive, with an estimated revenue of over $12 million.
Eager to know the crypto regulation framework of the Dominican Republic? By the end of this session, you may have grabbed everything you should know about the country’s crypto regulation landscape. Please dive in!
1. Crypto Regulation in the Dominican Republic: A General Overview
At present, cryptocurrency is a trending topic in the Dominican Republic. The Latin American country has recently witnessed a sharp increase in the usage of cryptocurrencies. As per a report published in 2022, it saw an increase of 52% in usage in that year, compared to the previous year. Evidently, the increasing acceptance of the cryptocurrency sector among the residents of the country has not yet made any influence on the government. The Dominican Republic has not yet created any regulatory framework to support the sector. Some of its recent actions have been discouraging in nature as well. In 2021, the Central Bank of the Dominican Republic issued a statement against the usage of cryptocurrencies. The statement was aimed to warn users that cryptocurrencies are not legal tender. The lack of crypto regulation in the country creates legal grey areas. This raises the possibility for scams and illegal activities, including money laundering. Creating a proper crypto regulation framework and educating its population about the risks and rewards of the cryptocurrency sector are the best things that the Dominican Republic government can do right now for the progress of its economy.
2. Crypto Regulation in the Dominican Republic: What’s New
Here are some of the interesting developments, which have happened in the Web 3 section in the Dominican Republic in the recent past.
October 11, 2023: The Central American Bank for Economic Integration and the Dominican Innovation Cabinet developed an AI strategy. This aligns with the National Innovation Policy 2030, fostering research, public-private partnerships, and talent development.
May 9, 2024: Popular Bank trained 1,200 entrepreneurs and SEs on AI opportunities in the Dominican Republic. The forum’s tenth edition had 2,800 registrations, which shows growing interest in Web 3 for business.
July 8, 2024: The Dominican Republic ranked high in the Global Index on Responsible AI, recognised for ethical AI development by the Global Center on AI Governance in South Africa.
3. Crypto Taxation Framework in the Dominican Republic Explained
The main principle of the Dominican Republic tax framework is balancing revenue needs with promoting investment. The country follows a territorial tax regime, which means any income earned within the country is subject to taxation.
Corporations: are supposed to pay a tax rate of 27% on local income.
Residents: face progressive tax rates up to 25% on their local income.
Gifts are taxed at 27%, and inheritance at 3%. The Wealth Tax is absent in the country.
For cryptocurrency users, the same principles apply, in the absence of a separate taxation framework for crypto. That means if you earn income from crypto activities within the Dominican Republic, such as trading or mining, it falls under local source income and is subject to the same tax rates.
4. Timeline of Crypto Regulation Evolution in the Dominican Republic
Here is the evolution of the country’s crypto regulation framework.
1996: Ratified the Inter-American Convention Against Corruption.
2002: Endorsed the UN Convention Against Transnational Organised Crime; and enacted a law to combat money-laundering.
2017: Implemented the Anti-Money Laundering and Terrorist Financing Act, which modernized financial crime laws.
2021: Central Bank warned that cryptocurrencies are not government-backed assets or legal tender.
Endnote
In conclusion, creating a comprehensive crypto regulatory framework in the Dominican Republic is a challenging task. An ideal regulatory framework for the country will be one that can strike a balance between encouraging innovation and protecting users. To create such a strong cryptocurrency regulatory framework, what is needed essentially is a strong collaboration among the government, financial institutions and the crypto community. At the time the world is swiftly running towards its digital future, it is better to reach such a collaboration at the earliest. Or else, the country may miss its ticket for its digital economic future.
Also Read: Crypto Regulations in Bolivia 2024
