Regulation
Cryptocurrency Regulation in Chile 2024
Chile, located in the west of South America, is known for its stability and prosperity. With its capital, Santiago, shining as the economic heart of the country, it boasts a powerful high-income economy. It holds leading positions in various global rankings, from economic freedom to competitiveness. The introduction of the Ley Fintec, a Fintech law, is an exciting step forward. This law is expected to transform the country’s economic framework by using various technological possibilities, including the possibility of digital finance. It is extremely important for the cryptocurrency sector.
Here we cover everything you need to know about the current regulatory environment for cryptocurrencies in Chile. Can’t wait? Keep reading!
1. Cryptocurrency regulation in Chile: general overview
Chile’s approach to cryptocurrency regulation took a major step forward with the introduction of the Fintech Law or Ley Fintec. The law establishes clear guidelines for activities involving crypto assets, such as cryptocurrency exchanges, investment advice, and custody services. To ensure proper oversight, the Financial Market Commission (CMF) introduced General Rule No. 502 in early 2024. This rule requires financial service providers to register and obtain authorization from the CMF. The Ley Fintec empowers the Central Bank of Chile to issue regulations to ensure the security and reliability of digital assets.
2. Ley Fintec: the FinTech law in Chile
The introduction of the Fintec Law is a milestone in the history of Chile, especially in terms of its financial landscape. The law was approved by the Chilean Congress in October 2022 and was promulgated in January 2023. The particularity of this law is that it aims to modernize the country’s banking and payments sectors. Promoting financial innovation and inclusion is the strategy it proposes to achieve the desired modernization. The main aspect of the law is the introduction of an open financial system. What it says about fintech companies and cryptocurrencies is essential to understand, as it allows us to understand how the country views these sectors. The law provides regulations for fintech companies and payment initiation service providers. This means that these companies and service providers are required to comply with security and reliability standards. In the cryptocurrency sector, the law provides rules for exchanges.
3. Regulation of cryptocurrencies in Chile and main areas of activity
Exchange, custody, borrowing, and yield are the four main areas of activity in the cryptocurrency industry. Let’s see how the cryptocurrency regulatory framework in Chile regulates these four key areas of activity.
Exchange: The FinTech Act regulates cryptocurrency exchanges. They are classified as alternative trading systems. Only exchanges that have received authorization from the Financial Markets Commission are allowed to operate.
Jail: Cryptocurrency services are also regulated by the FinTech Act. Like exchanges, custody service providers are also required to register and obtain authorization from the CMF.
Loan: There are currently no specific guidelines issued by regulators regarding borrowing in the crypto sector in Chile.
Yield: Similarly, yield-related activities, such as earning interest on cryptocurrency holdings, are also not regulated in the country.
4. Regulation of cryptocurrencies in Chile: what’s new
Here are the latest developments in Chile regarding cryptocurrency regulation.
December 22, 2023: The Tribunal de Defensa de la Libre Competencia has resolved a legal dispute, ruling against crypto exchanges Buda.com, CryptoMKT and OrionX in their case against Chilean banks.
April 22, 2024: The Central Bank of Chile has announced plans to test the concept of a digital peso, moving closer to launching a central bank digital currency.
July 1, 2024: The IShare Bitcoin Trust has been listed on the Santiago Stock Exchange. This gives Chilean investors access to the Bitcoin spot ETF sector.
July 5, 2024: Tools For Humanity, operator of Worldcoin, has changed its data collection policies in Chile to exclude children and adolescents from providing biometric data.
5. Explanation of the tax framework for cryptocurrencies in Chile
Let’s understand the tax framework for cryptocurrencies in Chile.
People: An individual must declare the profit he made from trading cryptocurrencies, as profits from trading cryptocurrencies are subject to the global supplementary or additional tax.
Companies: They must treat crypto profits as income, subject to general taxes such as first-category tax and global supplementary or additional tax.
Service providers: If you offer cryptocurrency services, you must charge value-added tax (VAT) on your commissions. This means that service providers are required to issue invoices.
Exchanges: Cryptocurrency exchanges have additional responsibilities, such as filing the annual Affidavit No. 1891. In the affidavit, they are required to detail all related transactions and operations. They must also comply with the obligations of first-class taxpayers.
6. Chronology of the evolution of cryptocurrency regulation in Chile
Here is a timeline of the evolution of cryptocurrency regulation in Chile.
June 2016: The Financial Markets Commission clarified that crypto-assets are not regulated as securities but can be used as a means of exchange if both parties agree.
February 2019: The Central Bank of Chile has issued a note stating that while crypto assets can be used for trading and investment purposes, they are not considered legal tender.
May 2022: The Central Bank of Chile has released a preliminary report exploring the potential issuance of a central bank digital currency (CBDC).
October 2022: The Chilean Congress has approved the FinTech Law or Ley FinTec.
January 2023: The law was enacted, establishing a regulatory framework for financial innovation.
Endnote
In 2024, Chile is positioning itself as a pioneer in cryptocurrency regulation in Latin America. With new laws in effect, the country aims to bring clarity and stability to digital asset businesses. The regulatory framework promises to foster a robust environment for innovation in blockchain technology. This pioneering effort positions Chile at the forefront of regional cryptocurrency adoption, offering a potential model for other nations looking to navigate the evolving landscape of digital finance.
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