What is the attitude of Latin American central banks towards cryptocurrencies?

In Latin America, some countries are very enthusiastic about the encryption ecosystem, such as El Salvador. Legislating to make Bitcoin a legal tender once made this country the focus of the encryption field. On the other hand, Latin American countries also have a lot of resistance to cryptocurrencies. For example, although some central banks do not directly reject cryptocurrencies, they will issue warnings against the use of such assets from time to time.

Now, let's take a look at the specific attitudes of some Latin American central banks towards cryptocurrencies.

Argentina

Argentina has one of the strongest official stances on cryptocurrencies in Latin America. The Central Bank of Argentina issued a communiqué warning investors about the violent volatility of encrypted assets. The bank’s president, Miguel Angel Pesce, has publicly criticized cryptocurrency investors on several occasions.

“Now is the time to review the risks that crypto-assets may represent, recommending a cautious approach to mitigate a source of vulnerability for users and investors,” Argentina’s central bank said in a May 4 tweet.

On May 4, Banco Galicia, one of Argentina’s largest private banks, notified customers that they could purchase cryptocurrencies from its platform. But a day later, Argentina's central bank issued a statement saying banks were not allowed to facilitate such transactions.

According to a report by blockchain consultancy Chainalysis, Argentina is currently the fifth country with the highest cryptocurrency usage in Latin America and 28th globally. Considering that the Argentine currency has been one of the worst performers in the region over the past decade, many investors in the country see crypto assets as an opportunity to find alternatives to the peso.

Bolivia

The crypto ecosystem has not been received kindly in Bolivia either, at least from the perspective of the Monetary Authority.

On December 15, 2020, the Central Bank of Bolivia passed a resolution of the board of directors, deciding to "prohibit encrypted assets". At the time this decision was made, Bitcoin’s value was climbing vertically, finishing below $20,000 in December of that year and ending above $32,000.

On May 17, 2021, the Central Bank of Bolivia (BCB) issued a statement formalizing its decision and adding an additional recommendation: "Avoid" cryptocurrencies and refuse to "negotiate" because "cryptocurrencies are issued anonymously", And there is "no assurance that investments will be protected" in the event of losses due to fraud.

On May 4 of this year, the bank issued a tweet warning that cryptocurrencies were “illegal” and trading them was prohibited.

costa rica

The central bank of Costa Rica expressed a middle ground during the tenure of former governor Rodrigo Cubero (who left office on May 8), encouraging the development of the fintech industry and participating in the encryption field to a certain extent, but warning the risks of encrypted assets.

The country’s central bank issued a statement in 2017 saying the use of cryptocurrencies was legal in the country, but warned that those using them do so “at their own risk.”

The Costa Rican Monetary Authority has warned: “Cryptocurrencies do not strictly represent money, as they do not fulfill any of the three basic functions of money: as a recognized means of payment, as a unit of account, and as a store of value.”

Costa Rica Central Bank Building Photo credit: EI Financiero

The country’s central bank also focused on the “disproportionate volatility” of crypto assets and criticized the “energy consumption” required for the mining process, as well as the “consequent environmental impact.” The report also states that the lack of anonymity and traceability make them "a haven for illicit activities such as common or organized crime, money laundering and financing of terrorism".

At the time, Cubero said such assets would be regulated “sooner or later,” confirming a few weeks later that the Central Bank of Costa Rica maintains a “vigilant and tolerant” stance on cryptocurrencies.

Guatemala

Guatemala’s Banking Supervisory Authority (SIB) warned in February 2021 that cryptocurrencies are not legal tender in the country under the Currency Law. The law states that, for Guatemala, only the quetzal is legal tender.

The SIB added that virtual currencies are not backed by the Guatemalan government and that "they are not considered foreign currencies, are not guaranteed and cannot be compelled as a means of payment for transactions of goods and services".

The Bank of Guatemala said in a statement that it is the only entity in Guatemala that can issue banknotes and coins.

Sergio Recinos, president of the Central Bank of Guatemala (Banguat), said: “Virtual currencies are not supported by the Guatemalan government because they may not meet protection standards or risk mitigation procedures.”

However, a crypto enclave has emerged in the Central American country — “Lago Bitcoin,” a project aimed at replicating the beach town of El Zonte in neighboring El Salvador. The beach town of El Zonte was a pioneer in accepting cryptocurrencies long before Salvadoran President Nayib Bukele enacted bitcoin laws.

“Bitcoin offers an economic freedom that current fiat currencies or other cryptocurrencies don’t have. Having a bank account in places like the U.S. and Guatemala is a way to create personal freedom,” Bitcoin Lake founder Patrick Melder said in an interview earlier this year. And the first step to wealth in a generation. "

“In Guatemala, 60 to 65 percent of the population is unbanked, causing widespread poverty. Bitcoin is the ultimate private property that cannot be confiscated. If you can keep 12 words in your head, then you can put your Bitcoin anywhere in the world and pass it on from generation to generation,” he said.

Mexico

Banxico is developing a digital currency as part of a long-term payments strategy that will take three years, as central bank governor Victoria Rodríguez Ceja predicted on April 21.

Bank of Mexico Governor Victoria Rodríguez Ceja Photo credit: Bloomberg Línea

However, Rodríguez Ceja warned that crypto assets “are unbacked assets, they are not legal tender, and since they are volatile, they can pose a risk to individuals who decide to access them”. She drew a distinction between the planned Mexican digital currency and crypto assets.

Bitcoin has several supporters in the Mexican Congress, who advocate for its regulation. In fact, just a few days after Rodriguez Ceja spoke, Senator Indira Kempis of the Mexican Civic Movement Party, along with Blockchain Land director José Rodríguez, installed a Bitcoin ATM inside the Senate for educational purposes, alongside the BBVA , Banorte and Banco Afirme existing ATMs.

On April 26, Kempis tweeted a photo of a Bitcoin ATM and wrote: "For financial freedom, inclusion and education in Mexico."

Paraguay

“Bitcoin and other cryptocurrencies are not considered banknotes or coins, are not mandatory in Paraguay and therefore do not enjoy a state guarantee,” the Central Bank of Paraguay (BCP) said in a statement on September 21, 2021.

The country’s central bank tweeted a link to a communiqué on September 19, 2020, reminding users to be wary of cryptocurrencies.

Peru

The Central Reserve Bank of Peru (BCR) released a statement titled “Risks of Cryptocurrencies,” detailing how “several international authorities have expressed their concerns about the risky and speculative element of high volatility in cryptocurrency prices.” , which affects those who buy cryptocurrencies.”

The bank added that those investing in virtual currencies, or cryptocurrencies, should be "aware of the risks" such as "loss of value investing due to high price volatility, and the possibility of fraud," as well as "its possible use for illegal activities." .

In March, BCR President Julio Velarde warned: “The volatility of cryptoassets can go in any direction, up or down.”

He also argued that "they have no intrinsic value" and "they are not a means of payment".

The statement by the governor of the central bank of Peru comes against the backdrop of a volatile and bearish market in major cryptocurrencies. According to Chainalysis, Peru ranks 4th in Latin America and 22nd globally in terms of cryptocurrency adoption levels.

Dominican Republic

Like other countries in the region, the Central Bank of the Dominican Republic has issued an official statement about the risks that those investing in cryptocurrencies may face.

"They are not legal tender and therefore enjoy no state backing, their validity or use as a means of payment cannot be guaranteed, and no one is obliged to accept them as payment for goods or services," the bank said on September 21 last year. warned in a published document. The document was issued within the framework of extreme volatility in the cryptocurrency market.

At the time, Bitcoin had soared from $30,000 to $52,000 in less than two months before falling back to $40,000 within a week.

Héctor Valdez Albizu, Governor of the Central Bank of the Dominican Republic Photo credit: Bloomberg Línea

Furthermore, central bank governor Héctor Valdez Albizu, who has held the position since 2004, said in February that crypto assets are risky virtual assets “not backed by any central bank” and “cannot be considered as money.”

Valdez Albizu said: “Despite their growing popularity in recent years, their use as a means of payment has been very limited, more like a high-risk asset, into which a specific group of investors has committed resources in recent years. "

In summary, countries in Latin America have varying degrees of regulation or rejection of cryptocurrencies.

Outside Latin America

Additionally, European Central Bank (ECB) President Christine Lagarde recently expressed her disapproval of crypto assets. In an interview with broadcasters in the Netherlands, Lagarde said: "My humble opinion is that cryptocurrencies are worthless, they don't have any basis, there is no underlying asset that acts as a security anchor in operations that use cryptocurrencies." The central banker also said such transactions should be regulated because many people do not understand the risks and end up "losing everything and being disappointed".

In addition to Lagarde’s criticism, many other major central bankers around the world have also criticized cryptocurrencies.

Federal Reserve Chairman Jerome Powell admitted in September 2021 that he does not intend to ban such assets, although he has pointed out on various occasions that due to its high volatility, Bitcoin is not "a useful store of value" and that encrypted assets Merely a "speculative asset" without any backing.

Fed decisions often have a very decisive indirect impact on cryptocurrency valuations, as every rate hike or signal of monetary tightening hits the price of risky assets, at least in the short term.

Like some of his peers, Bank of England Governor Jon Cunliffe has frequently warned about the risks of cryptocurrencies, even saying their prices could drop to zero.

Source: Cointelegraph Chinese edited from Bloomberg Línea:

https://www.bloomberglinea.com/english/what-do-latin-american-central-banks-say-about-cryptocurrencies/