Uruguay’s Central Bank intends to regulate cryptocurrencies in the country

RIO DE JANEIRO, BRAZIL – The Central Bank of Uruguay (BCU) announced this week that, in light of the recent increase in the use of cryptocurrencies in the country, market regulation is being assessed. To this end, the government is willing to amend the current laws.

Thus, it confirmed that it is conducting a detailed analysis of “operability” with digital assets. It believes that by the end of this year it could have a proposal to amend the current legal provisions with a clear framework to advance regulations governing these activities.

This will help to better adapt to the introduction of new rules aimed at cryptocurrencies in the future, as detailed in the communiqué.

“Details will be provided in due time on the roadmap of the activities to be developed during the year 2022 with the aim of advancing in the institutional definitions on this issue,” it indicated.

The BCU specified that, due to their features, some digital assets “favor anonymity and reversibility of transactions,” which may imply the exposure of operators to significant risks. Such is the case of money laundering, fraud or terrorist financing.

In a statement published on its official website, the BCU said that throughout 2021 an internal working group has been dedicated to studying the ecosystem and, as a result, created a “conceptual framework” focused on business and other operations executed with cryptocurrencies.

In the statement, the BCU said that, although “these instruments may have the potential to contribute to the development and efficiency of the financial and payment system,” they may also potentially create “new risks or exacerbate existing ones,” presumably due to the “absence of specific regulation to mitigate them.”

In the first instance, the BCU indicated that digital assets “are not legal tender” in Uruguay, because “they were not issued and are not backed by any central bank,” thereby clarifying that the Uruguayan peso is the only currency of that denomination in the country.

In this respect, the central entity stated that Uruguayan financial institutions and businesses are not required to process transactions with cryptocurrencies and other virtual assets, or to accept them as a means of payment.

RECOMMENDATIONS FOR CRYPTOCURRENCY ADOPTION

However, the Central Bank of Uruguay recommended users to conduct an evaluation to analyze the risks involved in operating with this type of assets. Suggesting that high yields are typically associated with high risks.

All actions being taken by banks are in line with BCU policy, with the aim of providing more information and recommendations “to those who are currently operating with virtual assets, as well as to all financial system users.”

The regulation issue is not new in Uruguay. In August, a bill to regulate Bitcoin (BTC) and other cryptocurrencies stated that the government would issue up to 4 types of licenses for this industry.

REGIONAL INTEREST IN CRYPOCURRENCIES

The Central Bank of Uruguay’s announcement comes at a time when the region is starting to take digital currencies much more seriously, seeking to streamline regulatory procedures to effectively address the commercial and operational considerations of such assets.

According to analysts and enthusiasts, the interest came after El Salvador’s government made Bitcoin its official currency as of September 7.

As part of the mentioned statement, the BCU also addressed cryptocurrency enthusiasts, recalling that digital assets are not legal tender within the country’s jurisdiction. The BCU also clarified that activities related to cryptocurrencies are not regulated by any agency in the country. As a result, the protections that apply to ordinary investors do not apply to citizens involved in cryptocurrency trading or investments.