Regulation
Cryptocurrency Regulations in Peru 2024
Peru is entering the cryptocurrency world with new regulations. This South American country, known for its active economy, has a population of over 32 million. The country relies heavily on exports such as copper, gold, zinc, textiles, and fishmeal. The country trades primarily with the United States, China, Brazil, and Chile. Despite ranking 76th in the 2023 Global Innovation Index, a large portion of the country’s workforce—at least 70% of the total workforce—works in informal jobs.
It was in December 2021 that Peru first presented a new bill to define and regulate cryptocurrency transactions. It aims to provide a clearer regulatory framework for the cryptocurrency sector. However, digital currencies are not supported by Peru’s main financial institutions, such as the Central Reserve Bank of Peru (BCRP), the Securities Market Agency (SMV), and the Banking, Insurance and Pension Fund Management Agency (SBS).
Will the major intuition that presided over the introduction of the new cryptocurrency law lead to a complete integration of digital finance into the country’s economic landscape? Only time will tell.
1. Cryptocurrency Regulation in Peru: General Overview
In Peru, crypto assets are still a gray area. Is it illegal? This is a complex question. Legality or illegality is not clearly defined by law. This means that you can buy and trade cryptocurrencies in the country. But there are some restrictions. Advertising for financial services related to cryptocurrencies is limited unless you are a regulated financial institution. The Peruvian government is considering a new law to regulate cryptocurrencies. Unfortunately, this initiative is currently facing some opposition. Recently, a decree subjected virtual asset service providers to anti-money laundering regulations. This decree requires these service providers to follow strict compliance measures.
2. Regulation of cryptocurrencies in Peru: what’s new
February 20, 2024: Peru has announced plans to establish a regulatory framework for AI. A new bill has been presented to Congress.
February 28, 2024: The Lima Stock Exchange has added three Bitcoin spot ETFs to diversify its investment options. These ETFs include iShares Bitcoin Trust’s IBIT, Invesco Galaxy Bitcoin’s BTCO, and Vaneck Bitcoin Trust’s HODL.
May 2, 2024: The Council of Ministers has published a draft regulation for the promotion of AI. The draft defines key terms related to AI and highlights the potential benefits of AI.
June 7, 2024: The Central Bank of Peru has partnered with India’s National Payments Corporation to create a system similar to India’s UPI. The primary objective of this initiative is to promote financial inclusion. It also aims to improve payment interoperability.
3. Bitcoin micro-economies in Peruvian villages
In remote Peruvian villages, Bitcoin is having a significant impact on unbanked communities. The NGO Motiv has been at the forefront of this change since 2019, traveling to remote areas to educate locals about the use of Bitcoin. Since late 2020, the NGO has established 16 Bictoin microeconomies, where Bitcoin serves as the primary currency for buying and selling goods and services. This initiative is vital in Peru, where over 50% of the population is unbanked. Most transactions in Peru are made in cash, using the Peruvian sol, which has experienced significant inflation. In June 2024, the annual inflation rate in Lima reached 2.3%, driven by rising transportation and housing costs. The consumer price index also saw a slight increase of 0.12% month-on-month.
4. Peru’s new crypto asset law explained
In Peru, the new Cryptoasset Law was introduced in December 2021. The bill aims to define what a cryptoasset is. It also attempts to define the responsibilities of virtual asset service providers. It suggests creating a public registry for these service providers. This measure will allow users to verify their legitimacy. Notably, the law requires these service providers to inform users that cryptocurrencies are not considered legal tender in the country. It also requires these service providers to inform users of the risks involved in handling cryptoassets. Interestingly, the law allows companies to incorporate and hold cryptoassets. Companies are allowed to treat them as inventory or intangible assets depending on their intended use. However, the law does not recognize bitcoin as legal tender.
5. Explanation of the tax framework for cryptocurrencies in Peru
In Peru, cryptoassets are considered non-physical items that can be transferred or sold, like patents or copyrights.
Companies: For Peruvian companies, the sale or transfer of cryptocurrencies is taxed as capital gains at 29.5%.
People: For individuals, these transactions are not taxed unless they are carried out regularly.
VAT and TTF: Cryptocurrency transactions are not subject to VAT as they are not listed as taxable transactions. The Financial Transaction Tax (FTT) applies because cryptocurrencies are often transferred via digital wallets. However, if cryptocurrencies are exchanged for cash and deposited into a local bank, the FTT would apply.
6. Chronology of the evolution of cryptocurrency regulation in Peru
2018: Peru announced the creation of PeruCoin, a virtual currency worth about 10 US dollars. The project was blocked and was suspected of being a scam. It raised concerns about cryptocurrencies.
December 2021: A bill has been introduced to regulate cryptocurrency activities in Peru.
March 2023: The Central Reserve Bank of Peru has published a report on the benefits and risks of creating a digital currency.
July 2023: The government has issued a supreme decree making cryptocurrency exchanges virtual asset service providers. VASPs are required to report to the Financial Intelligence Unit.
Endnote
In 2024, Peru finds itself in an uncertain situation when it comes to cryptocurrency regulation. While not explicitly illegal, crypto assets operate in a legal gray area in the country. The government’s willingness to adopt new regulations is facing challenges, despite recent decrees on anti-money laundering measures for crypto service providers. At the same time, initiatives such as Motiv’s Bitcoin Microeconomics highlight the practical impact of cryptocurrencies in unbanked regions. Clarity on the status of cryptocurrency regulation is very crucial if the country plans to overcome its economic limitations by leveraging digital economic opportunities.
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