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Witnessing the digital breakthrough

Latin America: From State Support of Cryptocurrency To Jail For Mining

01 October 2018 14:31, UTC
Latin America: From State Support of Cryptocurrency To Jail For Mining
By Theodore Serdotetskiy

Latin American countries are notable now for an unprecedented growth in the blockchain sector. This market is expected to grow by 30.3% in the next five years. However, the old world in the face of banks resists the evolution in the economy, inhibiting the development of the crypto market. The reason is clear: banks are afraid of losing investors. Thus, on September 25, 2018, the market capitalization of the cryptocurrency was $207 billion, and, for example, indicators of JPMorgan Chase - $392 billion. But it is known that cryptocurrencies are very volatile: six months ago its market capitalization was $470 billion, exceeding the JPMorgan Chase's indicators.

One of the bright conflicts between banks and crypto brokers happened in Brazil. According to the Brazilian Blockchain and Cryptocurrency Association Banco do Brasil, Banco Bradesco, Itaú Unibanco, Banco Santander Brasil, Banco Inter and Sicredi have closed accounts for crypto-companies and individuals. Banks explain their actions by the fact that crypto-exchanges are guilty of the lack of customers data.

However, crypto-brokers themselves are sure that banks simply abuse their powers. The Administrative Council for Economic Protection of Brazil (CADE) will check the country's largest banks in connection with the harassment of crypto companies. Although, CADE does not consider the behavior of banks rational, however, in the course of its investigation the Council intends to coordinate further actions with the Central Bank.

This is not the first conflict of this kind: in April 2018 in Chile, banks organized a real block against crypto-exchanges and closed their accounts. Then exchanges Orion x, Buddha and Cryptomarket suffered. However, already in the same month, the court decided to unlock the accounts and the exchanges won the round.

In order to understand how the crypto market of Latin America is developing and regulated Bitnewstoday.com did a review.

Brazil: cryptocurrency exchanges are more popular than banks

Brazil had benefited from the economic boom at the early 2000s, but the high level of corruption, which had affected even large enterprises such as Petrobras, had prevented Brazilians from taking advantage of the situation. At the moment, Brazil is Latin America's leader in GDP - $2,138,918, which is based on the service sector and the industrial sector. But despite its high GDP, Brazil is actually experiencing a recession.

Probably, the economic downturn caused Brazil to become a pioneer in the field of crypto-trading and now more and more citizens of this country open accounts not in traditional banks, but on cryptocurrency exchanges. In may 2018, about 1.4 million accounts were registered on the crypto-exchanges of Brazil, while on the traditional ones - only 600 thousand.

Since the largest Brazilian investment company XP Investimentos, which manages capital over $35 billion, decided to launch a cryptocurrency exchange in Brazil, it became clear that banks will not be able to put a spoke in crypto traders’ wheels for a long time.

Mexico: request authorization from the Central Bank to make transactions

Mexico ranks second in GDP - $1,212,831, most of which is provided by the service sector. Agriculture also plays a significant role.

The monopolization of the Mexican economy and the lack of the necessary legislative framework create conditions that on the one hand protect the economy fr ,nom the crisis and on the other do not allow to get out of the long stagnation.

On December 13, 2017, the Mexican Central Bank said that transactions with cryptocurrencies are unreliable since they are not regulated by law. However, on March 1 this year, the government adopted a law concerning cryptocurrencies. It says that digital currency cannot be considered a legal payment instrument. But, nevertheless, it received the status of a commodity. And the Mexican Central Bank controls cryptocurrency exchanges.

Also, this law allows banks to work with crypto accounts. It is worth noting that the control of the Central Bank for all types of operations on the crypto market in Mexico is very tight. For example, after registration, the client will not be able to use his account on the first day to perform certain operations.

On September 10, 2018, the Mexican government published a circular concerning FinTech, which says that crypto-brokers must request authorization for transactions from the Bank of Mexico.

Argentina: the government pins hopes on digital currency

The Argentine GDP, which is mostly provided by the tertiary sector and the industrial sector, ranks third in Latin America - $625,921. Like Brazil, the country has been in recession for several years now. Because of high inflation (at the end of the month the Argentine Central Bank raised the rate to a record 60% to stop the collapse of the national currency) the Argentine authorities are looking for funds for economic growth. As it turned out the cryptocurrency has obvious advantages against the rapidly depreciating peso.

In Argentina crypto traders can breathe easy: the government believes that the development of the cryptocurrency will improve the economic situation and digital assets have the status of legal payment instruments.

In addition, in Argentina, they promise to establish a large number of crypto ATMs. Of course, the Argentine authorities like other countries understand the risk associated with illegal operations, such as money laundering, so all cryptocurrency transactions are accountable at the state level.

Colombia: the President promised to "freeze" the tax on digital currency

In past Colombia had a status of “Banana Republic”, but now this state is experiencing an unprecedented rise, ranking fourth in GDP in Latin America - $327.978. The main share of GDP is service, industry, and agriculture.

On December 27, 2016, the Colombian authorities took a conservative position in relation to virtual assets, saying that the only currency of the country is the peso. However, due to the popularity of virtual currencies and the growth of investment in the crypto sphere, the Colombian government decided to limit itself to taxation instead of a complete ban. This decision is explained by the fact that the cryptocurrency is a financial asset, and so it is also taxable.

On June 10, 2018, the Buda exchange was subjected to a banking embargo and lost its accounts in Colombia in the same way as it was in Chile and Brazil. Later, on 21 September, the representatives of Buda addressed directly to the Colombian President Ivan DUQUE, asking for help. The President said that he wants to make Colombia a technological leader in the region. He also proposed to freeze taxation on digital assets for five years and noted that blockchain companies need to develop more actively to create jobs. Thus, it is possible that the situation with Buda will be resolved in favor of cryptocurrency exchange.

Moreover, on Monday 24th, the Colombian Congress presented a draft bill, called "On cryptocurrencies, or digital currencies”. This bill proposes the issuance of licenses for trading coins and 5% tax on all transactions in the cryptomarket.

Peru: the authorities will support the crypto market

The level of Peru's economy is average - the country's GDP is $231,567. It is based on the service sector, the industrial sector, and agriculture. However, unlike Argentina, Peru's GDP is growing steadily. Together with Uruguay, Colombia and Chile Peru are classified as an emerging market.

Before the PeruCoin project, the population of Peru had extremely vague ideas about what cryptocurrency is. And if at first Peru has not kept up with the technology in relation to other Latin American then in past month there was an unprecedented growth in the cryptocurrency market: during August the trading volume rose to 50%.

It is interesting that most Peruvians do not use traditional banks, so the digital currency just occupies an empty niche now.

Uruguay: the state will regulate the crypto market

The neighborhood with Brazil and Argentina made Uruguay dependent on their economic situation. About 45% of Uruguay's exports come to its neighbors. Although the country's GDP is only $63,370, Uruguay is classified as an emerging market, because the commodity boom of the 2000s turned out to be a success for it and GDP, which is based on services and industry, has grown significantly.

The state is going to take control of cryptocurrencies. In June this year, the Uruguayan Сhamber of Financial Technology decided to create a special Committee, which will have to deal with the regulation of everything related to the digital currency. In the future: to prevent financial terrorism and money laundering, but to do everything for the transparency of the crypto industry.

At the moment all projects of the Uruguayan government are under development and there are no specific regulatory mechanisms yet. However, representatives of the Uruguay Chamber of Financial Technologies actively attract businessmen and cryptocurrency experts to cooperation.

Paraguay: the cheapest mining

Paraguay belongs to the least developed countries of Latin America with a GDP of $43,776, the basis of which is the tertiary sector, industry, and agriculture.

Paraguay is actually more suitable for mining than any other country in Latin America. The reason for this is low energy consumption-only $55.7 per MWh. For comparison, in Argentina and Chile, where there is also a relatively low energy consumption, mining costs $93.5 per MWh and $89.47 per MWh respectively. But the most attractive thing in Paraguay is that the authorities do not control the market of digital assets, so Paraguay is among the TOP countries in digital money laundering. Crypto traders will get to the Wild West. Of course, as it should be in The wild West every man for himself and no one guarantees protection from cryptocurrency scams!

Bolivia and Ecuador: bad climate for crypto trading

Authorities have given the crypto traders the smallest piece of the pie in Ecuador. The economy of Ecuador is stable, GDP - $106,621. It is based on services, agriculture, and industry.

Back in 2014, any cryptocurrency was banned at the legislative level in Ecuador. Violators were threatened with criminal responsibility. However, later the authorities allowed trading in cryptocurrency. But one cannot buy goods and services using the digital currency in Ecuador. It is interesting that despite tough measures against violators the first crypto ATMs have already appeared in the capital of Ecuador Quito.

Bolivia has a GDP of $40,737 and is considered a third world country. About half of the country's population is engaged in agriculture.

Bolivia is among the top countries with the most severe conditions for the crypto trading. Any cryptocurrency is considered a financial pyramid in Bolivia and even mining is banned here. It is known that for an attempt to teach the population the basics of crypto trading the Bolivian authorities arrested more than 60 citizens.

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