After nearly five years of a blanket ban involving payments with Bitcoin (BTC) and other virtual currencies, Bolivia appears to have changed its stance on cryptocurrencies.
According to a press release by the Central Bank of Bolivia (BCB), individuals and enterprises can now use digital assets to pay for goods and services in the South American nation after a four-year ban on their use.
The latest move by the central bank follows a Board Resolution to repeal a previous resolution in 2020 that sought to ban the “use of channels and Electronic Payment Instruments (IEP) for the purchase and sale transactions of virtual assets.” The implication of the 2020 resolution saw financial entities in Bolivia barred from facilitating virtual asset transactions, forcing the local payments ecosystem to fall down the pecking order in Latin America.
Per the announcement, the reversal is a multi-agency collaboration involving the Financial System Supervisory Authority (ASFI), the Financial Investigations Unit (UIF), and the central bank. The release hints at a regional collaboration involving high-level discussions with the Latin American Financial Action Task Force (GAFILAT).
The central bank disclosed that the U-turn is a play to improve the payment ecosystem in the country in light of the rising digitization in the region. Cryptocurrencies in Latin America have ascended since 2021 following El Salvador’s decision to elevate BTC as legal tender.
“Within this framework, Board Resolution No. 084/2024 will provide the population with an additional mechanism that will contribute to the strengthening of financial and commercial activities,” read the release.
Unlike El Salvador which gave BTC the status of legal tender, Bolivian authorities clarified that residents will not be forced to accept virtual currencies as they are only legal tender.
Rolling out regulations for the new regime
Lifting the ban is only one part of the challenge with Bolivian authorities bracing for the impact of an avalanche of virtual asset service providers (VASPs) flooding in to fill the gap. GAFILAT, in its report to the Bolivian central bank, urged the banking regulator to roll out watertight rules for the incoming regime.
Keen to adhere to the recommendations of GAFILAT, Bolivia’s Financial Investigations Unit will regulate the operations of VASPs, specifically for the prevention of misuse linked to terrorism financing and money laundering. The Financial System Supervisory Authority is expected to hold the reins relating to financial intermediation entities (FIE) including commercial banks and investment banks.
