Crypto Regulations In Chile 2024

Cryptocurrency is rapidly evolving, and governments around the globe are scrambling to establish clear regulations.

Chile, situated on the western side of South America, is known for stability and prosperity. With its capital, Santiago, shining as the economic heart of the country, it boasts a powerful high-income economy. It enjoys leading positions in various global rankings, from economic freedom to competitiveness. One exciting development is the introduction of the Ley Fintec, which is a Fintech Law. The law is expected to transform the economic framework of the country using various possibilities of technology, including the possibility of digital finance. It is extremely significant for the cryptocurrency sector. 

Intrigued? Read on to discover how Chile is becoming a leader in crypto regulation and what this means for the future of digital assets.

1. Crypto Regulation in Chile: A General Overview 

Chile’s approach to cryptocurrency regulation has taken a significant step forward with the introduction of the Fintech Law or the Ley Fintec. The law sets out clear guidelines for activities involving crypto assets, such as crypto exchanges, investment advice and custody services. To ensure proper oversight, the Financial Market Commission (CMF) introduced General Rule No. 502 in early 2024. The rule requires financial services providers to register and obtain authorisation from the CMF. The Ley Fintec empowers the Central Bank of Chile to issue regulations, in order to ensure the security and reliability of the digital assets. 

2. Ley Fintec: A New Dawn for Finance in Chile

The introduction of the Ley Fintec is an important step in Chile’s history, especially when considering its financial landscape. The Chile Congress approved the law in October 2022, and it was enacted in January 2023. What makes the law special is the fact that it targets the modernisation of the country’s banking and payment sectors. Promoting financial innovation and inclusion is the strategy it proposes to achieve the targeted modernisation. The main aspect of the law is the introduction of an Open Financial System. What it says about fintech companies and cryptocurrencies is vital to understand, as it allows us to understand how the country sees these sectors. The law brings regulations for fintech companies and payment initiation service providers. This means that these companies and service providers must meet security and reliability standards.

In crypto, law is king or it can lead one to some real great trouble!

3. Prime Areas of Crypto Regulation in Chile 

The Fintech Law categorizes crypto exchanges as alternative trading systems, requiring them to secure authorization from the Financial Market Commission to operate.

• Exchange: The FinTech Law regulates crypto exchanges. They are categorised as alternative trading systems. Only those exchanges, which have authorisation from the Financial Market Commission, are allowed to operate. 
• Custody: Crypto services are also regulated under the FinTech Law. Like exchanges, custody providers are also required to register and get authorisation from the CMF. 
• Borrowing: There are currently no specific guidelines issued by regulators regarding borrowing in the crypto sector in Chile.
• Yield: Similarly, yield-related activities, like earning interest on crypto holdings, are also unregulated in the country.  

4. What’s New in Chile’s Crypto Regulation

Recent developments in Chile’s crypto regulatory landscape include:

• July 5, 2024: Tools For Humanity, operator of Worldcoin, updated its data collection policies in Chile to exclude children and adolescents from providing biometric data.
• July 1, 2024: The IShare Bitcoin Trust was listed on the Santiago Stock Exchange, offering Chilean investors access to spot Bitcoin ETFs.
• April 22, 2024: The Central Bank of Chile announced plans for proof-of-concept testing for a digital peso, a step towards launching a Central Bank Digital Currency.
• December 22, 2023: The Tribunal de Defensa de la Libre Competencia ruled against crypto exchanges Buda.com, CryptoMKT, and OrionX in a legal dispute with Chilean banks.

5. Understanding Chile’s Crypto Taxation Framework

Let’s understand the crypto taxation framework in Chile. 

Individuals

Profits from crypto trading must be declared and are subject to the Global Complementary or Additional Tax.

Businesses

Businesses must treat crypto profits as income, subject to taxes like the First Category Tax and the Global Complementary or Additional Tax.

Service Providers

Crypto service providers must charge Value Added Tax (VAT) on commissions and issue invoices accordingly.

Exchanges

Crypto exchanges have additional responsibilities, such as filing the Annual Affidavit No. 1891, detailing all trades and operations, and adhering to first-category taxpayer obligations.

6. Timeline of Crypto Regulation Evolution in Chile

Here is the timeline of Crypto Regulation Evolution in Chile. 

• January 2023: The law was enacted, establishing a regulatory framework for financial innovation.
• October 2022: The Chilean Congress approved the Fintech Law.
• May 2022: The Central Bank of Chile released a preliminary report on the potential issuance of a central bank digital currency (CBDC).
• February 2019: The Central Bank of Chile stated that while crypto assets can be used for exchange and investment, they are not considered legal tender.
• June 2016: The Financial Market Commission clarified that crypto assets are not regulated as securities but can be used as a means of exchange if both parties agree.

Endnote

In 2024, Chile is emerging as a leader in crypto regulation in Latin America. With new laws in place, the country aims to provide clarity and stability for digital asset ventures, fostering a robust environment for blockchain technology innovation. This not only benefits businesses but also fosters trust among investors, ultimately encouraging wider adoption of digital assets.

As Chile continues to refine its approach, the world will be watching with keen interest, eager to learn from this great example.

Also Read : Crypto Regulations in Canada: Key Updates for 2024