Latin America has been at the forefront of crypto adoption, in part due to the region’s economic difficulties, underbanked population, and openness to technological innovation. The continent is also home to the first country in the world to accept Bitcoin as legal tender: El Salvador.
Nonetheless, countries on the continent take a wide variety of approaches to cryptocurrency regulation, ranging from the extremely friendly (El Salvador and Brazil) to the somewhat hostile (Bolivia and Ecuador). This guide will provide an overview of these countries’ stances towards crypto as regards taxation and other considerations. You can also view a specific country’s crypto laws via the official websites for its government and regulatory agencies.
Cast your vote for the country you think will be the next to make crypto legal tender here!
How Crypto is Classified in Latin America
Countries most often classify cryptocurrencies as tradable assets like securities. To date, El Salvador is the only country in the world to have made Bitcoin, or any other crypto, legal tender. However, many countries in Latin America do not levy capital gains taxes on assets in general, whether crypto or not, making investing there much more attractive.
Countries in Latin America have attracted a large number of companies in the past by catering to their demands for more deregulation and lower taxes.
By taking a relaxed approach to how crypto is classified (or even by not classifying it at all), countries can attract crypto, blockchain and fintech companies in order to boost their economies.
Relaxed Tax Regulations
In general, countries known as tax havens — like the Cayman Islands — do not levy corporate taxes or income tax on money earned outside of their territories. This is a major reason why crypto firms like Binance have set up shop there.
In Latin America, Panama and Costa Rica are two examples of countries with attractive tax laws and are, for this reason, already popular jurisdictions for offshore banking and various corporate headquarters. In addition, Panama has advantageous extradition laws that makes it an ideal place for those who want to keep a low profile.
Countries ‘Going All In’ on Crypto
A number of countries in Latin America view cryptocurrency as a way to get ahead in the global economy. These include:
El Salvador has certainly led the way for crypto adoption in Latin America. Only time will tell how its Bitcoin experiment will play out in the long run but it could serve as an example for countries looking to solidify their position in the crypto and blockchain economy.
El Salvador isn’t just the first country to have made Bitcoin a part of everyday life, it has also subsidized Bitcoin mining efforts using renewable energy. If more countries make resources available for building blockchain infrastructure, this would be beneficial for crypto not only in Latin America, but worldwide.
Mexico currently has a growing contingent of legislators who would like to see a more crypto-friendly legal framework. The country is also home to one of the largest crypto exchanges in the region, Bitso. Banco Azteca, one of the largest banks in the region, has also hinted at accepting Bitcoin in future. Crypto could greatly help the Mexican economy and provide a means for the unbanked to secure a form of financial autonomy.
Panama is a strong contender to become the next country to fully endorse Bitcoin. Panamanian congressman Gabriel Silva has argued that “Panama cannot be left behind,” claiming that if the country wants to be “a true technology and entrepreneurship hub,” it needs to support cryptocurrencies.
Paraguay is seeking to attract international business and investment by passing legislation that will position it as one of the most crypto-friendly countries in the region. Additionally, the country has an abundance of electricity and renewable energy to help power Bitcoin mining efforts.
Venezuela isn’t necessarily friendly toward decentralized cryptocurrencies, yet its economic circumstances are forcing many citizens to conduct business using Bitcoin. Venezuela’s government has already launched its own centralized digital currency, the Petro. However, most Venezuelans would prefer to hold decentralized currencies like Bitcoin. Remittances are also a big part of life for many Venezuelans and crypto can help avoid the associated fees for many families.
The country legalized crypto mining in the fall of 2020 but with a caveat: miners must operate as part of a national digital mining pool. A growing number of people and businesses in Venezuela are accepting Bitcoin due to high inflation and a strained economy.
Anti-Crypto Countries in Latin America
There are, of course, Latin American countries that don’t share the same enthusiasm for Bitcoin and other cryptocurrencies. Keep in mind, however, that regulations and policies for blockchain and crypto are constantly evolving. What holds true today may not tomorrow.
Bolivia is the only country in Latin America that has fully banned Bitcoin and all cryptocurrencies in order to protect its sovereign currency and dissuade citizens from taking risks in the volatile crypto market.
Although Ecuador doesn’t expressly forbid crypto trading like Bolivia, the country is adamant about barring Bitcoin as legal tender for goods and services. The government has also repeatedly warned citizens that cryptocurrencies are highly speculative and are not a safe investment.
Crypto Exchange Laws in Latin America
Crypto exchange laws are different for every country on the continent and some countries have not yet specified any laws regarding digital currency trading or exchanges. This lack of organized regulation has made some countries in the region an attractive option for new companies looking to set themselves up as either centralized or decentralized exchanges (DEXes).
Most countries in Latin America recognize crypto as an asset class but not as legal tender. Countries like Mexico regulate crypto exchanges and demand anti-money laundering (AML) compliance from crypto firms through various registration and reporting requirements.
Mexico’s Bitso crypto exchange bills itself as the first fully regulated exchange in Latin America. It is overseen by the Gibraltar Financial Services Commission.
How To Find Out About Crypto Laws in Any Country
With some research, you will be able to find the legal framework for crypto in any country. Government websites will inform you about the legal status of digital asset ownership and trading, relevant regulations, tax obligations, mining laws, and more.