Regulation
Chile is poised to lead Latin America in crypto regulation, although it lags behind in adoption
The country now has a FinTech law that creates a category for “crypto-assets”.
Out of 33 countries in Latin America, it may be surprising to some that a small part of the deep south is leading the way in crypto.
Most followers of the blockchain industry will probably know that Argentina has a grassroots-led crypto ecosystem, while Venezuelans are challenging an authoritarian system using digital assets and that Brazil is a giant blockchain market. holders of cryptocurrencies.
However, Chile is rarely in the spotlight. But that may be about to change.
Chile approved a new FinTech law in 2023, which includes a category for “crypto assets.” This places Chile at the forefront in terms of regulating the blockchain industry compared to its neighbors.
Last week, the country’s crypto ecosystem came together to CriptoSummit Latam conference in part to discuss the implications of the law regarding cryptocurrencies when it comes into effect in February 2025.
“Having a FinTech law, and the [recently added] The standard that will regulate crypto assets puts us in a leading position for the region,” said Felipe Godoy, partner at Group of wolvesa law firm specializing in cryptocurrencies.
According to Godoy, although the law is still in its infancy, he appreciates that it “provides legal certainty.”
In other words, the industry now exists within a regulatory framework, not the gray zone in which it operated.
Easier to perform
Chile, which has a small population and relatively high access to financial services, may prove to be a good testing ground for the rest of the region, if approved legislation provides useful guidelines for digital assets.
Godoy’s point of view agrees with that of Cristobal PereiraCEO of Colledge, a Web3 educational platform based in Chile.
“This is positive because it will help develop a deeper market, attracting both domestic and international players,” he told The Defiant.
Although the law does not affect Colledge’s business model, Pereira said, it does have administrative implications.
Pereira explained that it will now be easier to use national and international payment channels without having to provide banks with explanations about where the money comes from, “and our transactions will not be blocked either.
Tedious paperwork
However, at least one crypto entrepreneur is not entirely happy with this rule.
Sebastián Saá, CEO of Sugar block, a Chilean startup that offers investors passive income on their crypto, told The Defiant that there are still a lot of unknowns going on. The CEO also said that regulators often lack expertise when it comes to the industry and how blockchain technology works.
SugarBlock has been operational since April 2022 and is working to comply with the rules, which are burdensome due to regulators’ misunderstanding, Saá said.
According to Saá, crypto companies face inefficiencies because they must adapt to standards written by agencies that do not fully understand the industry or the underlying technology.
And newer companies, like SugarBlock, find themselves saddled with lots of red tape to keep operating — a reality that could prevent more companies from springing up.
Stable financial system
Latin America is home to more than 650 million people, including 122 million unbankedwhile several countries in the region are experiencing double- or triple-digit inflation.
Meanwhile, Chile, with a population of 19 million, has a relatively more robust and stable financial system that allows 97% of the population to access financial instruments, according to a study. 2019 survey by the Superintendence of Banks and Financial Institutions.
Late adoption
Yet even though Chile is no stranger to crypto – more than 1% of the population has peered into the orb of Worldcoin, and the country’s largest exchange, Buda.com, has onboarded over 500,000 users – it’s also not known for being the most user-friendly when it comes to cryptography.
The country’s stability, banking access and low inflation rates mentioned above could be behind the low levels of crypto adoption in the country – there is no urgent need for uncensored money like in other parts of the region.
Chile is the sixth country in Latin America in terms of cryptocurrency value received, according to a 2023 Chainalysis report, and the fifth in terms of GDP in the region. Argentina and Venezuela have higher degrees of adoption relative to their economic size.
Latin America lacks rules
The lag in adoption does not prevent local regulators from taking steps to adopt the technology at the policy level. Meanwhile, their counterparts have been slow across most of the region.
Mexican Senator Indira Khempis has been at the forefront of pro-Bitcoin legislative negotiations, but has said previously they are still in the educational phase.
On the other hand, Argentina has one of the largest crypto communities in the world, spawning dozens of projects, and has yet to pass pro-crypto legislation. Many are also awaiting help from recently elected libertarian President Javier Milei – although news surfaced on March 25 that the country would be create a registry of virtual asset service providers (VASP).
El Salvador is an exception.
Led by millennial President Nayib Bukele, the small Central American nation made headlines when it made Bitcoin legal tender in September 2021. But locals say adoption has been slow – Bitcoin users halved to 12% in 2023 – citing the lack of a real educational approach from the government, but the decision to become the first Bitcoin country was still pioneering.
While lawmakers have been slow to act in most Latin American countries on crypto, Web3-native companies continue to take significant steps.
Buenbit, an Argentinian scholarship raised $11 million Series A in 2021 to boost crypto adoption in the region, Tether spear a stablecoin in May 2022 for the Mexican peso, Unstoppable Domains expanded to the region in December 2023 in what the company called a “calculated movement“, and experts say Brazil has all the ingredients to be a Web3 Central.
And after
For Felipe Godoy, eyes should be on February 2025.
This is when the first phase of crypto company registration will end, and the industry will have a better idea of how many of them are operating, whether they are complying and, ultimately matters, whether the law helps foster innovation, or whether it simply kills them through its application.
Godoy thinks complexity is coming, due to the large amount of paperwork companies have to complete, but he calls it “normal.” First, he said, regulators need to recognize crypto in general before venturing into deeper waters.
Experts often tag Emerging Markets‘ potential for disruption of traditional sectors, particularly banking or financial services. Chile now has the chance to lead the way in Latin America when it comes to crypto