.png){kind=logo}
Cryptocurrencies have become more popular around the globe, and countries in the Americas have taken different approaches to regulate the complexities of digital assets. Let’s understand the different crypto laws and regulations governing major countries in North and South America.
The regulation of cryptocurrencies in the United States is multilayered and disjointed. Most cryptocurrencies are subjected to stringent security regulations by the US Securities and Exchange Commission. Similarly, a number of those same cryptocurrencies are regulated under commodity laws by the Commodity Futures Trading Commission, if they lean more toward derivative trading.
The IRS classifies cryptocurrencies as property, therefore, all crypto activities will be considered capital gains tax in all crypto transactions. Apart from this, each state has its regulations, so the regulatory landscape is different for every place. For instance, New York introduced BitLicense, whereby the companies involved with cryptocurrencies have to obtain a license to be legally operational.
Canada seems to observe a more comprehensive approach towards the regulation of cryptocurrencies, in contrast with the United States. The Canadian Securities Administrators issue guidelines for the regulation of cryptocurrency exchanges and Initial Coin Offerings (ICOs). In Canada, all businesses related to crypto are compelled to register before appropriate regulatory bodies. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is the anti-money laundering law enforcer in the country.
Cryptocurrencies in Canada are regarded as securities, and regulations have been made applicable. Regulation guidelines have been developed to provide a balance between innovation and consumer protection.
Mexico has also improved in legislation with cryptocurrencies by step-by-step designing their policies. The law known as Fintech Law was approved in March 2018, provided legal regulation for cryptocurrency operations, and forced cryptocurrency exchange and service providers to register with the government.
According to this law, companies are to comply with the AML regulations and safeguard users' deposits. However, the Mexican government does not acknowledge cryptocurrencies as a legal means of payment and is quite careful about their use in financial transactions. Despite such regulatory ambiguity, Mexico's crypto community is growing, and several steps are being taken to improve the regulation further.
The latest crypto law was signed in the country, numbered 14,478/22, which sets up a comprehensive framework for virtual assets. The law also mentioned who was in charge of these regulations, including the Central Bank of Brazil, which would look over the guidelines for the operation of cryptocurrency exchanges and providers. It does not apply Value-Added Tax (VAT) to the process, creating an even more favorable environment in their use and trade.
This law, which is expected to start in June 2023, also reflects the intentions of the Brazilian state to be transparent and responsible yet at the same time innovation-friendly in the crypto market.
Argentina has witnessed growth as a key player in the crypto space, but its regulations have been much more cautious. The Central Bank of Argentina clarified that cryptocurrencies are not a form of legal tender because they are not issued by the authority of any government. However, the proposed Law of Foundations and Initial Measures for Argentinian Liberty might hold some respite for the regulatory base for holders of cryptocurrencies, exempting them from the taxes levied on these assets.
However, earnings of cryptocurrencies above certain limits are still taxable, and cross-border transactions might be charged with 5-15% taxes. Such governmental unpredictability is an immense hurdle for businesses as well as investors.
Chile's regulatory framework has Law No. 21.521, referred to as the Fintech Law which has become effective during January 2023. The law also considers crypto assets as a value while promoting enhanced financial inclusion. Crucially, it excludes cryptocurrencies from VAT, this removes great stumbling blocks that businesses and consumers might face in carrying out free digital transactions.
The CMF and Central Bank of Chile enforce strict adherence to financial compliance and regulation in the crypto space.
Peru is very proactive in cryptocurrency regulation, not only by enacting Supreme Decree No. 006-2023-JUS that clarifies crypto exchanges are being considered as Virtual Asset Service Providers (PSAV) but also requires reporting to the Financial Intelligence Unit (UIF).
The VAT laws in Peru do not tax the transfer of cryptocurrencies, and in this regard, the new Crypto Asset Marketing Framework should be a way to try to organize regulations in Virtual Asset Service Providers to encourage healthy practices within the market.
Colombia is in direct contrast to adopting a lenient attitude towards the regulatory environment of cryptocurrency. The Colombian government has recently tightened its noose by enforcing a prohibition on banks from offering financial services to organizations that deal with cryptocurrencies.
Although they are not regarded as a form of legal tender, companies are allowed to buy and sell cryptocurrencies through the law. The government's take on the whole situation has exposed crypto businesses to an extremely challenging environment, mainly because banks deactivate accounts linked with cryptocurrencies due to warnings from the government.
Let’s delve into the comparative analysis of crypto laws in the major countries of the Americas to understand the basic differences.
The two main regions, North and South America, have put forward quite contrasting regulatory approaches toward cryptocurrencies, shaped by the economy, technological development, and governmental views on cryptocurrency usage within each country.
In the United States, it is fragmented because of multiple agencies that oversee the sector, but in Canada, it is unified in the oversight. South America is moving towards an all-encompassing regulatory process for Brazil and Chile, but Brazil is ahead of this process, as recently it passed the law on digital assets.
The status of being legal tender in the U.S. and Canada is quite different from Argentina and Colombia, where they are not. Cryptocurrencies are treated as either properties or securities in the U.S. and Canada. This attribute is fundamental in determining whether cryptocurrencies can be used for transactions and how they would be regulated.
A country like Brazil and Chile provides tax exemptions to cryptocurrencies, so investors encourage using them. However, Argentina's tax scheme may levy capital gains taxes, which is a less crypto investor-friendly environment.
Canada and Brazil, balance innovation with consumer protection, but in Colombia, the situation will be much more restrictive as it complicates the business environment for such firms that operate in cryptocurrencies.
The regulatory environment for cryptocurrencies in the Americas has been diverse and evolving. Some countries, including Canada and Brazil, have built clear, innovative, and balanced policies in favor of innovation in this space. Colombia and Argentina, however, will be challenged as the sector progresses in those countries. In the more mature stages of the crypto industry, there may be a trend toward a more unified, harmonized approach among countries to protect consumers while promoting responsible use of cryptocurrencies in the Americas.
