Uruguay: Central Bank to present crypto regulation project this year

RIO DE JANEIRO, BRAZIL – The Central Bank of Uruguay (BCU) reaffirmed in Parliament that in 2022 it would present to the Executive Branch a project to regulate at least part of the virtual assets market, the form that the local regulator uses to refer to crypto assets. The idea, in principle, will be to establish attributions on actors linked to the financial sector that work with these instruments.

“This year, we are going to be working and, surely, the Bank is going to propose a project to the Executive Branch related to the legal empowerment of attributions for the regulation and supervision of those providers because today it is not within the framework of attributions of the Central Bank, and it is visualized as natural that at least the virtual assets that are related to the financial sector or the financial activity remain under the orbit of the Central Bank”, said last week before a parliamentary committee the Superintendent of Financial Services of the BCU, Juan Pedro Cantera.

The head of the agency appeared on Thursday, March 31, together with the vice-president of the BCU, Washington Ribeiro, and a delegation from the institution, before the Special Commission for legislative purposes on transparency, the fight against money laundering, and organized crime.

According to the minutes of the meeting, Cantera stated that the regulation of “virtual asset service providers” is one of the “challenges” for this year, as it is one of the points recommended by the Financial Action Task Force (FATF).

President Luis Lacalle Pou spoke last Thursday during a business forum in Punta del Este about the crypto market regulation in Uruguay. First, the head of state said that from his point of view, “we have to separate blockchain from cryptocurrencies”, and then he pointed out his position on the role that the state should assume.

“I would have to dig a little deeper into who manages the blockchain in a cryptocurrency. I think it’s very nice as a dream now when a government embarks on that there has to be a regulation because you have to respond. One thing is that there starts to be speculation, and another is when you internalize it in a local economy and put it on a board. The state already assumes responsibility for circulating a currency that we do not know each of its creators and how the system works,” replied the Uruguayan president.

In Uruguay, the use of cryptocurrencies is allowed but not regulated. At the end of December 2021, the BCU issued the first document to start internalizing the issue, entitled Conceptual framework, to address the regulatory treatment of virtual assets, and where it made a first theoretical anchor.

The document established a generic definition of what the BCU understands as virtual assets and made a categorization of instruments to differentiate which will fall within the regulatory perimeter of the institution and which will not.

Transactions with virtual assets related to the securities market will be among the items to be regulated. Another point will be stablecoins and those operations that give rise to a backing employing fiduciary currency in local financial institutions.

Those denominated by the BCU as virtual exchange assets, including Bitcoin or Ethereum, will be excluded from the regulation. The entity warns that, although they are an exchange method, their use is similar to barter or cash payment. However, it will be regulated in the case of investments using traditional financial instruments. In this case, the regulation would not be on the “virtual exchange asset” but on the financial instrument, the document detailed.

The BCU set March 31 as the deadline for both private sector operators and public entities to make their suggestions on the regulation.

In an interview with Bloomberg Line last month, Ripio CEO Sebastián Serrano said that his company had already sent recommendations. “I think one of the most important things is defining the rules, minimum requirements for client knowledge, and money laundering programs for companies that interact with the banking system. It seems to me that these are things that BCU can look at and define rules on that,” he said.

In the opinion of the founder of one of the most relevant wallets and exchanges in Latin America, it is not up to the financial regulator to address the issue of cryptocurrencies within the blockchain. Serrano estimated that the potential market of crypto users in Uruguay is 300 thousand people.

With information from Bloomberg Línea