News  •  Regulation

Colombia Stops Short of Bitcoin Ban, Bars Banks From Industry

(@pete_rizzo_) | Published on March 26, 2014 at 19:51 BST

The Superintendencia Financiera de Colombia (SFC), the government body responsible for overseeing financial systems in the South American nation, issued new guidance on its treatment of bitcoin and other digital currencies on Wednesday, 26th March.

Notably, the release was distributed one day after it was was originally expected on Tuesday, 25th March.

Despite reports that the SFC could enact harsh restrictions on bitcoin – one report suggested it would go so far as to ban bitcoin transactions altogether, the SFC issued what amounted to a boilerplate warning to consumers, and blocked financial institutions from holding, investing in or brokering bitcoin transactions.

Informal translations of the statements, which were made public on the SFC website as Carta Circular 29, read:

"The Bitcoin is an asset that has no equivalent statutory legal tender in Colombia since it was not recognized as currency in the country."

The release indicated that bitcoin fails to meet the definition of a currency according to the criteria set forth by the International Monetary Fund (IMF), as it is not backed by a central bank.

Colombia's bitcoin warning

The SFC listed a host of concerns about bitcoin, naming the now-bankrupt Japan-based bitcoin exchange Mt. Gox, which imposed significant losses on users when it suddenly became insolvent earlier this year.

Further, the SFC reiterated that digital currencies can be used for illicit means, including money laundering and terrorist financing, and that users who are victims of theft are not able to achieve restitution through traditional means.

Read a translation of the warning:

"This Office notes that supervised entities are not authorized to guard, invest or mediate these instruments. Additionally it is for people to know and accept the risks inherent in their operations with 'virtual currency' risks."

Community reaction

Carlos Mesa, director of local digitcal currency avocacy group BitcoinColombia.org, spoke to CoinDesk about the news, noting that Colombia ended up adopting similar measures to those in China, a market where bitcoin is once again growing.

Said Mesa:

"We see this with as something positive. I know many don't, but this may be the first step for Colombia take this topic more seriously, raise awareness and look forward to regulation."

Roman Parra, of Colombia-based bitcoin buying and selling service provider Bitcoin Suramerica, also greeted the news as a positive for the local ecosystem, saying:

"I think this is a good step on the right direction, because the goverment now recognizes that BTC exists and is helping us to make it public and avoiding in some way that unscrupulous people try to scam using it."

Notably, Mesa had earlier scheduled a meeting with the SFC to be held this upcoming Friday, however, this has since been canceled. The local activist is, however, optimistic that he will have additional opportunities to work with the SFC as it explores the issue of digital currencies further.

Image credit: Colombian flag via Shutterstock

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