Business Colombia's banking sector is open to operations with bitcoin,...

Colombia’s banking sector is open to operations with bitcoin, “but with regulation”

Key facts:
  • The lack of regulation of the cryptocurrency sector keeps entrepreneurs from operating in Colombia.

  • The Colombian government’s strategy includes blockchains that handle crypto assets.

The president of the Colombian Banking and Financial Entities Association (Asobancaria), Santiago Castro, said that in the country’s financial sector there is currently an opening to participate in the world of bitcoin and cryptocurrencies.

Castro offered these statements during his short participation in the virtual forum organized by Congressman Mauricio Toro, in conjunction with Colombia FinTech, Fundación Blockchain Colombia and Alianza Blockchain Iberoamericana.

The event debate focused on the regulation of crypto assets and the projects for the use of blockchain carried out by the Colombian government. Among the panelists were also Mauricio Tovar, from the Colombia Blockchain Foundation; Jehudi Castro, presidential adviser; and Álvaro Delgado, deputy director of digital government of MinTIC Colombia.

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In the second part of the virtual forum on the regulation of crypto assets in Colombia. organized by Congressman Mauricio Toro, were the president of the Banking Association, Santiago Castro; Jehudi Castro, presidential adviser; and Mauricio Tovar, from the Colombia Blockchain Foundation. It was moderated by Santiago Pinzón, from the National Association of Entrepreneurs. Source: Screenshot of virtual forum / Facebook

During his speech, the president of Asobancaria added that -despite good disposition- banking entities operate in a highly regulated sector. Thus They must first of all comply with the existing rules and laws. However, “now we are waiting with the approval of sandbox regulatory ”, he said in reference to the pilot recently approved by the Executive.

“But while the tests are being carried out, we cannot advance anything, but continue to act as before. We await the movements and instructions of the monetary and supervisory authorities, ”Castro emphasized.

The president of Asobancaria recalled that, until now, crypto assets are not recognized by the Bank of the Republic of Colombia, so they cannot be admitted as currency.

“We move within that framework. The Financial Superintendence says that we cannot operate with cryptocurrencies and does not allow the use of our infrastructure to carry out operations with this type of assets, ”he emphasized.

When discussing the subject, Mauricio Tovar recalled the situation experienced by the exchanges in Colombia due to these limitations and the lack of regulation. Mention the difficulties of exchange houses to open accounts and work with banks. “This problem has caused the country to lose many opportunities for investment, innovation and jobs,” he said.

He adds that, despite the fact that Colombia is among the 5 Latin American countries with the highest number of transactions with crypto assets, many platforms decide to operate in other places in the region.

Venezuela has a greater number of transactions, but due to the difficulties faced in that country, entrepreneurs view Colombia with greater interest. However, the regulatory uncertainty in which we find ourselves causes them to go to other places, such as Argentina, for example.

Mauricio Tovar, Blockchain Colombia Foundation

Asobancaria and some ideas to regulate bitcoin exchanges

During the virtual event, the vice president of Asobancaria, José Manuel Gómez, took the place of Santiago Castro on the panel because the manager had to retire.

Gomez reiterates that banks are open to new competitors, such as cryptocurrency companies, which could complement, offer new services and strengthen the system. “But that entry must be regulated,” says the manager.

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The vice president of Asobancaria, José Manuel Gómez, raised some ideas in the forum to regulate bitcoin exchanges. Think that regulation must be strong. Source: Screenshot of virtual forum / Facebook

For the vice president of Asobancaria, it could be taken as a reference to South Korea or Japan, whose rules he sees very clear, especially in the handling of measures to know the customer (KYC) and rules against money laundering. That is why he thinks that regulation project -which is currently under review in Colombia- should establish minimum requirements for the exchanges can operate.

Minimum capital, internal control systems, operational security, segregating assets, accounting management should be required. This includes the definition of a corporate model and rules for the management of public resources. The FATF recommendations on transparency of information should be taken into account. The State should also review the entry and exit of money, grant licenses and have powers of intervention.

José Manuel Gómez, Vice President Asobancaria

To the above ideas, many of which are contemplated in the tests which will probably start in 2021, the manager adds that the regulation applied to exchange platforms would have to be adjusted.

Also think that the current bill should establish tax regulations. It concludes that what is lacking in the ecosystem is strong regulation that protects the consumer.

At this level of the debate, the moderator of the forum, Santiago Pinzón, of the National Association of Entrepreneurs of Colombia, began to ask questions from the public in relation to the closure of bank accounts to projects with cryptocurrencies. Gomez replied that it is not a specific policy against these companies. “These closures only respond to risk assessment, based on which the suspension can be decided.”

The Colombian government already thinks about crypto assets

Taking into account the previous proposals, the presidential adviser, Jehudi Castro, participated in the debate to present the government’s strategy in relation to blockchain and crypto assets.

He thus spoke of the so-called fourth industrial revolution, in the framework of which since 2018 it has been offered support to various projects and blockchain applications for official use. In that sense, it indicates that the government is putting the focus on public blockchains that handle crypto assets. He made a specific mention of Ethereum.

It is understood, therefore, that the strategy outlined with this technology is necessarily linked to cryptocurrencies and the digital economy.

“The issue of bankarization has become important,” says the presidential advisor, while explaining that from the situation generated by Covid-19, the importance of have new forms of digital payments, more accessible to all audiences.

So consider that the controlled space that will be opened with the sandbox It will allow to give a new approach to the process of regulation of cryptoactives and open the doors for their official use. “Although it is also possible that it is concluded that a regulation is not necessary,” according to Castro.

We are going to measure all the implications, taking into account the risks of criminal activities in cryptocurrency operations. All this work also involves the review of connectivity and Internet access in the country, since without connectivity citizens will hardly be able to take advantage of the technological innovation that blockchain brings.

Jehudi Castro, Presidential Advisor

The intervention of Álvaro Delgado, from MinTIC, sought to provide more clarity on this issue, when speaking of the interest and efforts of the government in provide higher levels of connectivity to Colombian homes. With this they plan to give greater impetus to the use of blockchain and the development of the digital economy in the South American country.

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