From September 21 to December 31, financial entities together with cryptocurrency exchange platforms can apply to participate in the sandbox regulatory. This was reported by the financial superintendent Jorge Castaño, within the framework of the digital forum entitled “Panorama for the regulation of crypto assets in Colombia.”
Castaño participated in the event organized by Congressman Mauricio Toro, in conjunction with the organizations Colombia FinTech, Fundación Blockchain Colombia and Alianza Blockchain Iberoamericana. The virtual forum featured two panels: one on cryptocurrencies and the other on blockchain. Among the panelists were also present Congressman Rodrigo Rojas and the president of the Banking Association, Santiago Castro. Both had to withdraw from the event for personal reasons.
Meanwhile, during his participation in the debate, the financial superintendent explained that the entities interested in being part of the pilot can access the official site of the Superintendency for more information on the application process.
It is the next step that the Colombian government takes, after the Ministry of Finance and Public Credit approve the decree of sandbox last September 14. Although the superintendent did not lay out the full schedule, it is quite possible that testing will begin in early 2021 and conclude at the end of that year.
When asked about other details of the pilot, Castaño said that he already has knowledge of about 4 financial entities that are willing to participate, as they have experience in links with the cryptocurrency sector. He also recalled that the objective of sandbox is to evaluate the operating parameters of the exchanges cryptocurrency, in addition to monitoring activity.
This is expected to establish the standards that would be taken into account for the regulation of the sector, highlighted Castaño. To do this, they will focus on the financial system testing transactions cash in and cash out (deposit and withdraw crypto assets), as reported by CriptoNoticias a week ago.
It is likely that the results of this pilot serve as input to the bill to regulate cryptocurrencies that are currently under review, after their approval suffered some delays at the beginning of this year.
In that sense, Congressman Mauricio Toro stated that since the process for the approval of the bill could take perhaps up to more than a year and a half, the period of one year that is calculated as the duration of the sandbox regulatory would be sufficient “to provide useful data for regulation.”
Castaño sees this synchronization as very favorable “in order to establish an adequate regulatory framework for Colombian users.”
However, the president of Colombia FinTech, Erick Rincón, expressed in the forum the urgency that exists in the ecosystem, because while this process gets underway, the cryptocurrency sector will continue for longer without a regulatory floor. “This gives rise to irregularities and the development of a black market that is not favorable for the country,” he stressed.
Even so, Rincón agrees with the advantages and progress that represents sandbox, by qualifying it “as a great step.” But he is concerned that some situations will continue to recur during this test period. He mentioned the difficulties faced by exchanges cryptocurrencies of Colombia to operate with the banking sector. He made reference to the circulars issued by the Bank of the Republic a few years ago, regarding crypto assets, warning about their risks but without prohibiting the activity.
These circulars have been subject to many misinterpretations and have resulted in the closure of platforms, and great difficulties for the operation of many exchange houses. What has brought as a consequence that there are now only three recognized exchanges in the market.
Erick Rincón, president of Colombia FinTech.
Exchanges in Colombia: between “demonization” and lack of trust
For Erick Rincón, Colombia’s financial sector unleashed a kind of “demonization” against cryptocurrency exchange houses. Given this comment, Superintendent Castaño considers that there has been no such “demonization” of the sector but “lack of confidence.”
In this regard, he adds that this type of situation occurs in all parts of the world and not only with crypto assets, but also with other areas such as mining or the purchase of currencies, for example. “All sectors that handle rare assets generate that lack of trust, it is not something exclusive to crypto assets. Anyone can close the accounts, “said the superintendent.
Castaño states that what is sought first is understand the traceability of the cryptocurrency sector (the how and when of transactions, as well as their movements and the origins of resources). “This is precisely what will be evaluated with the tests, in a controlled environment.”
Castaño took the opportunity to clarify that what is not allowed is that exchanges capture money from the public and offer custody services or virtual vaults. They can only offer the sale of crypto assets. This, until the regulatory landscape is clear and that function is supervised by the State. The closures of some platforms have to do with these types of offers, which put users’ money at risk, as he emphasized.
Based on the above, it is necessary to clarify that the operation of the exchanges common is limited by these restrictions. This, taking into account that these platforms usually have digital wallets under their control in which users deposit their money. They do this to make managing funds easier. Seen this way, current Colombian regulations would only allow operating exchanges without custody, such as LocalCryptos or HodlHodl, in which the platforms only serve as guarantors, but do not protect the keys of the users’ wallets.
At this point in the event, the forum moderator, FinTech consultancy Clementina Giraldo, raised the concerns of the attendees. Many voiced their concerns about what will happen to the exchanges do not participate in the sandbox. To these questions, the superintendent replied that while the tests are carried out, everything will continue to function as it has been until now.
As for what to expect after the sandbox, Carlos Castaño hopes that a regulatory framework appropriate to reality will emerge from this. He also said that today the environment around cryptocurrencies It is very different from when the first circulars from the authorities were made, because now they have much more robust cybersecurity standards that help to understand this technological environment much better.
The superintendent also spoke about the pronouncements on cryptocurrencies made in recent months by various international organizations, such as the FATF. “The new directives of these bodies have mobilized in the world many new tools to create a much clearer regulatory environment for all,” he concluded.