Published 3 weeks ago • 5 minute read

How Are Cryptocurrencies Regulated in 2022

Unlike fiat currencies, cryptocurrencies have introduced revolutionary attributes: decentralisation and

anonymity. Whilst decentralisation has benefited those seeking to overcome the limitations imposed by traditional financial intermediaries, anonymity has given a boost to digital crime. Nevertheless, cryptocurrency exchanges promote the benefits of decentralisation whilst narrowing the potential for digital crime.

Furthermore, on a global level, central banks and regulators share a common aim: to impose successful regulatory standards that protect their monetary systems against instability but with freedom to explore innovative products. The problem, however, is that they are only synchronised in their aim whilst their regulatory approach remains distinct.

Here are examples of how three Latin American countries have imposed regulation oncryptocurrencies:

Brazil

The relationship between Brazilians and cryptocurrency has been incredibly positive. Brazil is the largest crypto market in Latin America. Brazilians own over $40 billion in cryptocurrencies and trade over 100,000 Bitcoins (BTC) daily.

Cryptocurrencies are considered: Assets

How are they regulated:

Brazil has held off on enacting any new crypto regulations thus far. As of 2019, however, the Brazilian legal authorities have announced that cryptocurrencies will not be traded as legal tender and acknowledged cryptocurrencies as ‘digital assets’ defined under the Brazilian Civil Code 10406/02. This is due to the inability of cryptocurrencies to perform similar functions as money.

For tax purposes, the Brazilian tax authority advised that investors must declare the asset in their income tax statement and declare any capital gains from sales. Additionally, transactions valued above $7,600 must be declared monthly.

What does this mean:

This means that cryptos are not widely accepted outside the digital economy. For instance, businesses are not forced to accept crypto in return for their goods and services but are free to do so. Hence, they do not significantly contribute to the Brazilian economy, unlike the local currency (real). Nevertheless, by classifying them as assets, the government does not eliminate their use entirely, and allows the public to invest and benefit from crypto. For example, as a hedge against inflation.

What’s next:

Lawmakers have recently seen an upsurge in criminal activities in the crypto sector and have thus started to consider the need for crypto regulation in 2022. A new bill is currently being discussed in Brazil that would place direct restrictions on crypto asset investors and exchanges. These crypto regulations are expected to protect investors and eliminate exchanges with questionable motives.

Mexico

Cryptocurrencies are considered: Assets

How are they regulated:

In 2018, Mexican financial authorities adopted crypto laws targeted at crypto activities. In 2021, the Bank of Mexico refuted any assumption that cryptos were legal tender.

Furthermore, Mexico’s Anti-Money Laundering Law was expanded to define ‘virtual assets’ as unsafe and to impose restrictions on them.

What does this mean:

The financial authorities in Mexico are very rigorous when it comes to cryptocurrencies. To keep a clear separation between the financial system and crypto assets, regulators warned traditional financial institutions of repercussions in case of direct involvement in cryptocurrencies. In essence, this means that there are relatively few opportunities to exchange crypto assets outside of the digital economy. However, it is acceptable to exchange virtual goods online, as long as anti-money laundering regulations are followed.

What’s next:

The Bank of Mexico has advised that more crypto regulations may be introduced, as the crypto market is still a target of digital crimes. It has not yet been disclosed what those crypto regulations will be, but they will close any loopholes open for money laundering. Furthermore, the Bank of Mexico has revealed its plans to release its own Central Bank Digital Currency (CBDC) by 2025 for financial institutions to distribute and use.

El Salvador

Bitcoin is considered legal tender

In September 2021, the Legislative Assembly of El Salvador declared Bitcoin (BTC) as legal tender.

The government launched the ‘Chivo’, a national Bitcoin wallet and deposited $30 in the wallet of each citizen to facilitate their transition to cryptocurrencies. 

What does this mean:

This means that BTC can operate similarly to the US dollar and can thus serve as substitute. Businesses must accept BTC in exchange for goods and services. Unlike other nations, BTC can be traded for a variety of commodities (beyond virtual platforms) such as petrol, houses, and taxes.

What’s next:

El Salvador is a poor country and around 70% of its people do not have a bank account. Crypto can provide the unbanked with access to international markets. As there is little crypto regulation on Bitcoin purchases, El Salvador’s decision is an opportunity for its citizens, who can purchase Bitcoin through an exchange and hedge against inflation. Furthermore, nationals are exempt from paying capital gains tax. El Salvador’s bet on Bitcoin could pay of once the cryptocurrency recovers from the current bear market.

 

DISCLAIMER 
The views, opinions and positions expressed in this article are those of the author alone and do not necessarily represent those of https://www.cryptowisser.com/ or any company or individual affiliated with https://www.cryptowisser.com/. We do not guarantee the accuracy, completeness or validity of any statements made within this article. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author. Any liability with regards to infringement of intellectual property rights also remains with them.

Comments

No comments yet... Start the conversation!