CMS Expert Guide to Crypto Regulation in Colombia

Disclaimer: This chapter was last updated on 5 September 2023 and does not reflect any subsequent developments. The information provided is intended for general informational purposes and should not be construed as legal advice.

In Colombia, cryptoassets are still unregulated as they are considered digital assets, not financial instruments. This means that transactions carried out with cryptoassets are not equivalent to transactions performed with legal currency (“Colombian Peso”) and hence are not subject to any scrutiny or regulation by the Colombian Central Bank (“Central Bank”) nor the Financial Superintendency (“SFC”).

As the Central Bank has explained in multiple concepts¹, cryptoassets are not considered to be a foreign exchange/currency under national legislation which means that they cannot be used to pay debts under the exchange rate regime. According to the Central Bank, cryptoassets are also not securities and, as such, they are not part of the Colombian Stock Market, hence supervised financial entities cannot legally invest in this type of digital assets.

Although the Central Bank has not set a legal definition for cryptoassets, it has conceptually defined them as “digital units capable of being used as a means of payment in the exchange of goods and services, as a store of value and as a unit of account. They are usually denominated in their own unit of account and are stored, traded and transferred electronically”.²

The SFC’s take on cryptoassets has been identical to that of the Central Bank’s, and in one of its public declarations³ stated that cryptoassets “do not constitute a security under the terms of Law 964 of 2005, therefore, they are not part of the infrastructure of the Colombian securities market, do not constitute a valid investment for the supervised entities, and their operators are not authorized to advise and/or manage transactions on them”.

Hence, in Colombia there is no regulation, legal definition nor an in-charge authority for cryptoassets.

Currently, there are no laws that regulate cryptoassets in Colombia. However, both the Central Bank and the SFC have stated that digital assets can satisfy payments methods, store value and have unit of account functions, but lack the attribute of legal tender and cannot be considered money, therefore, there is no obligation to receive them as a method of payment. However, as cryptoassets may be used as intangible assets, there is no explicit prohibition of the activities mentioned above, even though they are currently unregulated under Colombian law.

As explained earlier, cryptoassets are not regulated in Colombia and, therefore, there are no licenses required for their operation in the country. However, as briefly mentioned below, a bill was debated in the last Congress that established certain requirements for cryptoasset services providers in Colombia. This bill expired, but may be re-submitted in the new legislature that began 20 July 2023.

Pronouncements by the Colombian Central Bank:

As mentioned before⁴, regarding cryptoassets, the Central Bank has stated that they are “digital units susceptible of being used as a means of payment in the exchange of goods and services, as a store of value and as a unit of account”⁵. Furthermore, cryptoassets are schemes currently operated by “private agents, which allow the transfer of digital assets and information through a public registry of transactions synchronised and shared among all participants of the scheme without the need for centralised systems of issuance, registration, clearing and settlement”⁶.

Although the Central Bank has established that “these assets have the capacity to satisfy the functions of means of payment, store of value and unit of account”, both this institution and the Bank for International Settlements have stated that they lack the attributed of legal tender and cannot be considered as money. However, based on the significant growth of these schemes, the Central Bank has established that:

• They are not money, as the only monetary and account unit that constitutes a means of payment of legal tender with unlimited liberatory power, is the peso issued by the BanRep;
• They are not considered money for legal purposes;
• They are not a currency, since they have not yet been recognised by any international monetary authority and are not backed by central banks;
• They are not cash or cash equivalents;
• There is no obligation to receive them as a means of payment;
• They are not financial assets or investment property in accounting terms; and
• They are not a security in the terms of Law 964 of 2005, and therefore their mention or assimilation should be avoided.

The pronouncements made by the Central Bank hold significant importance as it is the institution responsible for monetary issuance and serves as the authoritative body in this matter. Given the absence of legislative or regulatory guidelines regarding these assets within the national legal system, these pronouncements serve as a valuable guide for comprehending the concept, extend and handling of cryptoassets in Colombia.

The Central Bank’s position toward cryptoassets could be summarised in that “these assets lack the essential attributes of money and are not, consequently, susceptible to be considered as such”. The latter is supported by the Central Bank’s statements regarding: (i) “most of the so-called cryptocurrencies are not obligations legally recognised by a legal person or institution that backs them and that responds for any fraud or failure in their schemes”; (ii) their issuance and security protocols are, in the opinion of the Central Bank, quite opaque, and that their prices are highly volatile; and (iii) “the protection of the consumer and the investor in these schemes is questionable and has limited acceptance”.

Finally, regarding the value of cryptoassets, the Central Bank stated that “The value of the cryptoassets derives from their possibility of being accepted in exchange for goods, services, payment of obligations, or in the acquisition of legal tender or financial assets, and the stability of their value over time. […] In other words, their value depends on the confidence that participants have in the present and future quality of their attributes to be widely accepted as a means of payment, store of value and unit of account against other similar alternatives".⁷

Statements of the Ministry of Finance

At the Banking Convention held in June 2023, Minister of Finance Ricardo Bonilla said that cryptocurrencies "are a reality" and that "there are interests in regulating cryptoassets. To those who have that interest, we are telling them that, first, they must guarantee the autonomy and independence of the Colombian Central Bank and that there can be no other source of primary issuance than the Bank".

He also said that cryptocurrency operations are "financial operations" and "must be reviewed and regulated" by the Financial Superintendency of Colombia.

These statements must be considered given that the Minister is a member of the Board of Directors of the Central Bank. 

The Financial Superintendency of Colombia

In July 2022, the SFC carried out the public consultation of a draft external circular aimed at modifying its approach towards cryptoassets, distancing itself from previous guidelines outlined in circular letters⁸. This position, as a whole, could be generally characterised as more restrictive.

In these circular letters, the SFC addressed the Central Bank´s position which states that cryptoassets cannot be classified as money. The SFC reminded the supervised entities that they are not authorised to custody, invest in, or facilitate transactions involving these types of digital assets. They explicitly stated that financial entities’ platforms should not be used for transactions involving cryptoassets. Additionally, they urged supervised entities to continue implementing appropriate and robust measures to prevent cryptoassets from being used for money laundering, terrorist financing, or concealing assets derived from such activities. These cautionary measures, according to the SFC, respond to the inherent risks associated with electronic currencies.

At the Banking Convention held in June 2023, the Financial Superintendent of Colombia stated that: "this cryptoassets market, which are not assets, which is not a financial market, has no reason to be under the surveillance of the Financial Superintendency" and added that "they have nothing to do with the functions of the Financial Superintendency, whose obligations are related to the supervision of financial assets".

The National Tax and Customs Directorate (the “DIAN”)

Through Opinions 314 of 2018 and 232 of 2021, the DIAN confirmed that cryptoassets are assets susceptible to be valued as intangible assets (according to Article 420 of the Tax Statute) and considered part of the equity of individuals⁹.

The Superintendency of Corporations

The Superintendency of Corporations has warned that when used in multilevel marketing businesses or programs, cryptoassets are illegal and may imply the configuration of investment fraud schemes (such as Ponzi Schemes), as follows:

• Official Communication 220-207096 of 25 September 2017: in this official communication the Superintendency of Corporations concludes that the sale of virtual currencies in multilevel modality is illegal, alluding to the prohibition of the sale or placement of securities through which resources are captured from the public through multilevel activities.
• Official Communication 220-097361 of 10 July 2018: the Superintendency of Corporations reiterated the Central Bank position that the cryptoassets are not recognised as currency or as an asset equivalent to legal tender and stated that the sale of cryptoassets in multilevel marketing activities would imply an illegal capture of money.
• Official Communication 220-196196 of 30 September 2020: the Superintendency of Corporations stated that it was not possible to contribute cryptoassets or cryptocurrencies to a corporation because their legal use was not permitted in Colombia.
• Official Communication 100-237890 of 14 December 2020: the Superintendency of Corporations changed its position regarding the possibility of contributing cryptoassets to a corporation and trading them in accordance with the company's corporate purpose. However, it subjected the validity of giving cryptoassets as a contribution to the capital stock of a corporation or trading with them to the following conditions: (i) that the cryptoassets meet the criteria for recognition as inventory or intangible assets, (ii) that the rules governing the contribution in kind (commercial code) are complied with, and (iii) that the partners of the company approve the appraisal of the cryptoassets.

As explained before, as cryptoassets lack regulation in the country, their providers do not have any specific requirements to provide cryptoassets services and products. This, however, does not mean that the entities that provide cryptoassets services and products in Colombia don’t have to comply with other regulations (anti-money laundering, data protection, labor law, corporate registry, among other). The extent of compliance with these norms will depend on various factors, such as if the company is incorporated in the country or not.

Note that, as mentioned before, a bill was debated in the last Congress in which cryptoasset providers would be regulated. However, this bill expired, but it might be re-submitted in the current legislature that began on 20 July 2023. ¹⁰

Banking entities currently cannot offer cryptoasset-related products or services as they are not authorized by the SFC. However, SFC enabled a regulatory sandbox project to allow banks to create alliances with cryptoassets service providers to experiment with different cash-in/cash-out services. However, this project had a duration of one year, which was already completed.

Up to date, the following are some of the main cryptoassets service providers available in Colombia¹¹:

• P2P Exchange

1. LocalBitcoins
2. Okx
3. LocalCryptos
4. Paxful
5. Binance P2P

• Cryptoassets exchange

1. Buda
2. SatoshiTango
3. Panda Exchange

• Cryptoassets ATM Machines

1. Athena Bitcoin
2. Panda BTM

• Digital cryptoassets wallets
• Zulu

1. Zulu
2. Littio

No. As explained before, SFC prohibited supervised entities from having custody of, investing in or intermediating with digital currencies, and urged individuals to be informed of and prepared to assume the risks inherent to transactions carried out with such instruments (Circular Letter 29 of 2014).

For tax purposes, cryptoassets are considered intangible assets. The DIAN established that “Colombian residents who have cryptoassets in their patrimony must declare them in their annual income tax return. The value for which they must declare them will be the equity value of these, either as an intangible asset (investment) or inventory. Therefore, the equity value of assets rule will apply.¹²

In accordance with Article 6 of Law 31 of 1992, the monetary unit and the unit of account in Colombia is the peso issued by the Central Bank, which holds legal tender status in the country. Cryptocurrencies, on the other hand, are not recognised as currency in Colombia and do not possess unlimited liberatory power as a legal means of payment. Consequently, creditors are not required to accept cryptoassets as means for paying debts.

However, the Central Bank has clarified that individuals are free to accept cryptocurrencies as a form of payment. Nevertheless, since cryptocurrencies lack backing from a central bank, the risks associated with their use must be borne by each individual. While official fiat currencies, such as the euro or the US dollar, are centralised and guaranteed by a central bank that controls their supply, cryptocurrencies are not. Therefore, cryptoassets do not hold legal tender status in Colombia. Consequently, there is no legal obligation to accept cryptocurrencies as a means of payment in Colombia.

It is important to note that, as cryptoassets are decentralised and not managed by a central bank, they are highly volatile and lack stability, as previously mentioned. As a result, the Colombian Central Bank, among many others, recommend that users thoroughly understand the risks associated with cryptocurrencies before engaging in their use.

In October¹³ 2022, the Central Bank’s Director Leonardo Villar informed that the entity was studying the possibility of issuing a Central Bank digital currency (“CBDC”)¹⁴, seeking to create an instant transfer system to facilitate and promote digital payments. DIAN´s Director also hinted the government’s intention to create a CBDC¹⁵.

To date, there have been no studies or statements by the Colombian Government which point to any possible regulation of the metaverse in the country.

The judicial branch, however, recently held the first trial in the metaverse, setting a paradigm for the future of law in the country.

¹ Please refer to section 4 for further information on these concepts.

² Banco de la República, Documento Técnico de Criptomonedas. Arango-Arango, Barrera-Rego, Bernal-Ramírez and Boada-Ortiz. Available here.

³ Superintendencia Financiera de Colombia, Carta Circular 52 de 2017. Available here.

⁴ Please refer to point 1

⁵ Arango, C., Barrera, M., Bernal, J. & Boada, A. (2018) Documento técnico – Criptomonedas. Banco de la Republica. Recuperado de: https://www.banrep.gov.co/es/publicaciones/documento-tecnico-criptoactivos

⁶ Ibid.

⁷ Banco de la República, Documento Técnico de Criptomonedas. Arango-Arango, Barrera-Rego, Bernal-Ramírez and Boada-Ortiz. Available here.

⁸ Circular letters 029 of 2014, 076 of 2016 and 052 of 2017.

⁹ Please refer to point 8 for further information.

¹⁰  The bill stated, among other provisions, that cryptoasset providers must comply with the following requirements: I) be constituted as a commercial company based in Colombia or as a branch of a foreign company, and be duly registered in the commercial registry; ii) have as exclusive corporate purpose the performance of activities classified as cryptoasset exchange services; iii) establish and maintain computer security programmes that ensure the availability and functionality of its computer systems, protecting said systems and the information stored in them from unauthorised access, use or manipulation; iv) adopt control measures aimed at detecting and preventing money laundering and terrorist financing; v) report to the Financial Information and Analysis Unit the information that is required in a general or particular way in the terms of Law 526 of 1999; vi) comply with personal data protection regulations contained in Law 1581 of 2012; and vii) implement customer knowledge and customer due diligence measures. Additionally, the law intends to create a Single Registry of Cryptoasset Exchange Platforms, whose purpose will be to register the service providers of cryptoasset exchange platforms.

¹¹ De acuerdo con el portal web CriptoNoticias

¹² DIAN Colombia, “Compilación de la doctrina tributaria vigente relevante en materia de criptoactivos”, October 2022. Available here.

¹³ SCD-000001353 / SCD-000001865 Opinion of the Secretary of the Board of Directors of the Central Bank of Colombia

¹⁴ https://www.elespectador.com/economia/macroeconomia/banrep-confirma-que-estudia-posibilidad-de-una-moneda-digital-colombiana/

¹⁵ https://www.ambitojuridico.com/noticias/tecnologia/banrepublica-estudia-posibilidad-de-crear-moneda-digital-colombiana