Regulation
Cryptocurrency Regulation in Chile 2024
Chile, located in the western part of South America, is known for its stability and prosperity. With its capital, Santiago, shining as the economic heart of the country, it boasts a powerful high-income economy. It enjoys leading positions in various global rankings, from economic freedom to competitiveness. An exciting development is the introduction of Ley Fintec, which is a Fintech law. The law is expected to transform the economic picture of the country by using various possibilities of technology, including the possibility of digital finance. It is extremely significant for the cryptocurrency industry.
Here, we explain everything you need to know about the current cryptocurrency regulatory environment in Chile. Excited? Keep reading!
1. Cryptocurrency Regulation in Chile: A General Overview
Chile’s approach to cryptocurrency regulation took a significant step forward with the introduction of the Fintech Law or Ley Fintec. The law establishes clear guidelines for activities involving cryptocurrencies, such as cryptocurrency exchanges, investment advisory, and custody services. To ensure proper oversight, the Financial Market Commission (CMF) introduced General Rule No. 502 in early 2024. The rule requires financial services providers to register and obtain authorization from the CMF. The Ley Fintec authorizes the Central Bank of Chile to issue regulations, in order to ensure the safety and reliability of digital assets.
2. Ley Fintec: The FinTech Law in Chile
The introduction of the Fintec Law is an important step in Chile’s history, especially when considering its financial landscape. The law was approved by the Chilean Congress in October 2022 and was promulgated in January 2023. What makes the law special is that it aims to modernize the country’s banking and payment sectors. Promoting innovation and financial inclusion is the strategy it proposes to achieve the targeted modernization. The main aspect of the law is the introduction of an open financial system. What it says about fintech companies and cryptocurrencies is crucial to understand, as it allows us to understand how the country views these sectors. The law introduces regulations for fintech companies and payment initiation service providers. This means that these companies and service providers are required to meet security and reliability standards. In the cryptocurrency sector, the law provides rules for exchanges.
3. Cryptocurrency regulation in Chile and main areas of activity
Exchange, Custody, Borrowing and Yield are the four main areas of activity in the cryptocurrency industry. Let’s take a look at how the Chilean cryptocurrency regulatory framework regulates these four key areas of activity.
Exchange: The FinTech Act regulates cryptocurrency exchanges. They are classified as alternative trading systems. Only those exchanges that have the authorization of the Financial Market Commission can operate.
Case: Cryptocurrency services are also regulated by the FinTech Law. Like exchanges, custodial service providers are also required to register and obtain authorization from the CMF.
Loan: There are currently no specific guidelines issued by regulatory bodies regarding cryptocurrency lending in Chile.
Product: Similarly, profit-related activities, such as earning interest on cryptocurrency securities, are also not regulated in the country.
4. Cryptocurrency Regulation in Chile: What’s New
Here are the latest developments in Chile in the field of cryptocurrency regulation.
December 22, 2023: The Tribunal de Defensa de la Libre Competencia has resolved a legal dispute, ruling against cryptocurrency exchanges Buda.com, CryptoMKT and OrionX in their case against Chilean banks.
April 22, 2024: The Central Bank of Chile has announced plans to test a proof-of-concept for a digital peso, moving it closer to launching a central bank digital currency.
July 1, 2024: The iShare Bitcoin Trust has been listed on the Santiago Stock Exchange. This gives Chilean investors access to the spot Bitcoin ETF sector.
July 5, 2024: Tools For Humanity, operator of Worldcoin, has changed its data collection policies in Chile, barring children and teenagers from providing biometric data.
5. Explanation of the regulatory framework for cryptocurrency taxation in Chile
Let’s try to understand the regulatory framework for cryptocurrency taxation in Chile.
Individuals: An individual is required to declare the profits made from cryptocurrency trading, as profits from cryptocurrency trading are subject to global complementary or additional tax.
Companies: They must treat profits from cryptocurrencies as income, subject to general taxes such as first-class tax and global supplementary or additional tax.
Service Providers: If you offer cryptocurrency services, you must charge value added tax (VAT) on your fees. This means that service providers are required to issue invoices.
Exchanges: Cryptocurrency exchanges have additional responsibilities, such as filing Annual Affidavit No. 1891. In the affidavit, they are required to detail all trades and related transactions. They must also adhere to the obligations of first-class taxpayers.
6. Chronology of the evolution of cryptocurrency regulation in Chile
Here is the timeline of the evolution of cryptocurrency regulation in Chile.
June 2016: The Financial Markets Commission has clarified that cryptocurrencies are not regulated as securities, but can be used as a medium of exchange if both parties agree.
February 2019: The Central Bank of Chile has issued a statement stating that while cryptocurrencies can be used for trade and investment, they are not considered legal tender.
May 2022: The Central Bank of Chile has published a preliminary report exploring the potential issuance of a central bank digital currency (CBDC).
October 2022: The Chilean Congress has approved the FinTech Law or Ley FinTec.
January 2023: The law was enacted, establishing a regulatory framework for financial innovation.
Final note
In 2024, Chile is moving forward as a pioneer in cryptocurrency regulation in Latin America. With new laws in place, the country aims to provide clarity and stability for digital asset initiatives. The regulatory framework promises to foster a robust environment for innovation in blockchain technology. The pioneering effort positions Chile at the forefront of regional cryptocurrency adoption, offering a potential model for other nations seeking to navigate the evolving digital finance landscape.
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