News  •  Regulation

Report Claims Colombia's Central Bank May Enact Bitcoin Ban

(@mpmcsweeney) | Published on March 21, 2014 at 21:15 GMT

The Superintendencia Financiera de Colombia (SFC) may be close to outlawing bitcoin transactions in the South American country, a report from a major nationally distributed newspaper claims.

El Tiempo reported on 20th March that the SFC, in conjunction with Banco central de Colombia, Colombia's central bank, and the Ministerio de Hacienda y Crédito Público, the executive body responsible for budgetary concerns, is preparing to issue a document outlining the government's stance on bitcoin and bitcoin-related activities.

According to El Tiempo, the SFC is set release the circular outlining the ban as soon as Tuesday of next week

The Colombian government is expected to cite a lack of effective market protections as one of the core reasons for the measures when it publishes the document, the report suggests. Additionally, the media outlet alleges that bitcoin is viewed by the Colombian government as a threat to the country's financial system.

However, there remains disagreement among South American bitcoin community members as to whether the restrictions will go as far as the report suggests, with some optimistic that the measure will simply amount to a stern warning.

Government opposition to digital currencies

An informal translation of the report indicates that senior Colombian officials such as Finance Minister Mauricio Cardenas have been working in recent weeks and months on an overarching policy for bitcoin. Research from the US Law Library of Congress, corroborated by BitLegal, indicates this would be the first time the country has spoken publicly about digital currencies.

El Tiempo quoted Cardenas during a recent speech before the country's national legislature in which he touted the strengths of the Colombian peso compared to digital currencies.

"Our currency is reliable, safe and generates no risk, while other forms of money [like Bitcoin] do not have the same level of support and guarantees," he remarked.

A source connected to the Colombian Ministry of Finance told El Tiempo that the ban may very well focus on Bitcoin handling activities rather than outright purchase by consumers.

"With bitcoin no illegal recruitment, because ultimately what you are doing is buying a product. But when others are offered to collect money from others to invest in that currency, there is already an illegal recruitment, and this brings many risks."

Colombia's central bank has also reportedly weighed against bitcoin, saying that it is not a real currency and therefore receives no institutional backing.

The Colombian Ministry of Finance nor the Superintendency of Finance have responded to press inquiries.

Community reaction

Sebastian Serrano, CEO of Latin American-focused payment gateway BitPagos, suggested that the initial reports may not be as ominous as they sound.

Speaking to CoinDesk, he said:

"What we know so far is that the government is going to issue a warning similar to the one issued by the Central Bank of China. Most likely not making bitcoin illegal but just restricting financial institutions from trading Bitcoin in attempt to stop speculation over the currency and avoid the effects of a crash."

Serrano added that while the news certainly isn't encouraging for the local Colombian ecosystem, the extent of any damage won't be known until the report is released on Tuesday.

Ulf Kuhn, founder of Chile-based telemarketing business Telemarketing Facil, indicated that he was unsure of what exactly to make of the report.

"First they say bitcoin and EVERY transaction is illegal. Then they say that offering investing services for bitcoins is illegal. Then they say they worked together with banks, but it's just a financial department statement."

Carlos Mesa, of local bitcoin advocacy group Bitcoin Colombia, took to reddit to discuss the news, suggesting more details would be forthcoming after he had an internal meeting with the SFC.

More central banks weigh in worldwide

While the Colombian government has not released its official document outlining the details of a ban, such a move would add to a growing chorus of governments and central banks worldwide that have moved against the Bitcoin.

Earlier this month, the Bank of Mexico banned domestic banks from handling bitcoin. The Mexican central bank cited its risks to the general public but did not directly outlaw consumer purchases of the cryptocurrency.

Other central banks, including those from Russia, Hungary, Cyprus and the Philippines, have issued warnings about bitcoin but have not moved to ban it, despite sometimes harsh rhetoric.

If as extensive as the report suggests, Colombia's policies would be among the most restrictive enacted worldwide.

Image credit: Colombian cathedral via Shutterstock

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