Cryptocurrency Regulation in Colombia Prior to 2023

Initial Regulatory Stance

As of the period leading up to 2023, Colombia had not implemented specific regulations for cryptoassets. The Central Bank of Colombia and the Financial Superintendency (SFC) did not consider cryptoassets as financial instruments, legal tender, or foreign currency. Therefore, transactions with cryptoassets were not subject to scrutiny or regulation by these financial authorities. Cryptoassets were conceptually understood as digital units capable of being used as a means of payment in the exchange of goods and services, a store of value, and as a unit of account, but they were not part of the Colombian Stock Market or recognized for investment by supervised financial entities​​.

Taxation and Identification of Cryptoassets

For tax purposes, the Colombian tax authority, DIAN, classified cryptoassets as intangible assets. Colombian residents holding cryptoassets were required to declare them in their annual income tax return based on their equity value. This classification and requirement highlighted an acknowledgment of cryptoassets’ growing relevance within the national economy​​​​.

Legislative Developments and New Law

In a significant shift, Colombia moved towards introducing a new cryptocurrency law, marking a turning point in its financial landscape. Spearheaded by the Finance Minister, this initiative aimed to regulate digital assets and potentially establish a national digital currency. The government, in collaboration with the Central Bank and the Financial Superintendence, sought to craft a law aligning digital assets with the country’s financial regulations. This law was expected to bring clarity and control to the digital assets market, integrating them into the financial system​​​​.

Role of the Financial Superintendence

The Financial Superintendence was set to oversee the emerging cryptocurrency market, recognizing cryptocurrencies as a new class of financial assets. This oversight was particularly crucial in a rapidly expanding digital financial services sector, with a significant presence of fintech companies and digital wallet usage​​.

Proposed Regulatory Framework

The proposed regulatory framework aimed to foster the cryptocurrency market’s growth and strengthen trust within the ecosystem. Key aspects of this framework included legal recognition of cryptocurrency exchanges, clarity and security for users, and identity verification processes for cryptocurrency transactions. The focus was also on ensuring free market and fair competition, transparency in operations, and mandatory separation of user and company funds to prevent theft and fraud. The regulation also emphasized the need for crypto platforms to provide enhanced information, education to users, and robust cybersecurity measures to protect against cyberattacks and data breaches​​​​​​​​​​​​.

In conclusion, prior to 2023, Colombia’s legislative landscape for cryptocurrencies was marked by a lack of specific regulations, with cryptoassets not recognized as legal tender or financial instruments. However, the country was on the cusp of a significant legislative shift, with a new law in the works aimed at regulating and integrating digital assets into the financial system, reflecting an evolving stance towards this burgeoning sector.