While 2016 was the year when blockchain made its full debut in the domain of governance and FinTech, the recent news from South America shows that bitcoin has still an uphill battle in some regions. Recently, Colombia’s government came with a legislation that determines that bitcoin and other digital currencies are not legal in the nation.
The news comes about as the year closed for bitcoin in a spectacular manner, with the currency steadily pushing towards the $1k mark. This turn of events in Colombian will not change anything, but it unexpected nature demands that a closer look is taken.
Colombia, like the rest of the continent, is not a highly relevant factor in the bitcoin community, but the move shows that still, bitcoin is in the minds of the legislators, connected to illegal activities. Here is some background information about the Colombian decision and what will it mean in the coming months, especially related to the price rise currently being experienced by BTC on a global level.
The Proof of the Measure
While there is no doubt that the news is authentic, the exact nature of the legislature is not that clear. The change in laws and regulations was published by PanAm, a Colombian outlet, which suggested that BTC, along with digital currency at large, became illegal in the country. According to PanAm, they acquired the news through an administrator of a regulatory body which published the change recently as well.
The entire development comes after an organization that is connected with the Colombian Ministry of Commerce, Industry and Tourism, called Superintendencia de Sociedades published that all digital currencies, covering bitcoin as well, were foreseen in the country. Instead, the only currency valid in Colombia is the peso.
Francisco Reyes Villamizar made the statement acting as the head of the Superintendencia. Now, through the organization’s association with the Columbian government, their statement is seen as a reflection of official policy.
Colombian Digital Currency Investment Clubs
The news is not completely uncorrelated with the situation in the South American nation. In fact, the move is unrelated to any movements in the global bitcoin market. Instead, the decision desires to impact the phenomena of investment clubs that have recently become popular in Colombia. These organizations offer their members a chance to join and invest money, in exchange for doubling the sum they invested. To make matters worse, these clubs promise this will take place in just two months.
Currently, the global media is trying to understand how this is connected to bitcoin, but other similar schemes offer a potential explanation. This scenario would entail an organization like these investment clubs operating its own cryptocurrency. Unlike AltCoins, these currencies are all encased in a local network with very limited reach and a growth projection that is basically a pyramid concept.
In it the scheme, the ROI of investors grows as new people enter into the network. Because of this, organizations like this are regularly targeted by law enforcement in every corner of the world. But, if the process of money changing hand is placed on a blockchain system, the genesis of every individual swindle can be diluted.
In a case of an investigation, the culpability can be degraded if the medium of the transaction was a digital currency. If the case ever comes to trial, the organizations of the clubs can claim innocence and have no actual money trail leading to them.
Because of this, even though plenty of individuals and companies either use bitcoin for things like betting online or develop inside of the same ecosystem, utilizing BTC in the country could become difficult.
Will Authorities go through with the Enforcement?
Banco de la República is the central bank of Colombia. It has stated time and time again that it can only issue valid currency that can be used in the country and the same was repeated in this case as well. However, even though Colombia was never too friendly to bitcoin, the statement of the Banco de la República is not new. Before, no one ever tried to hamper the process of using bitcoin in the country.
The new move apparently simply underlines the previously known law and makes sure it is clear it is also covering the domain of digital currencies. It could be expected that the law enforcement will now try to tackle the investor clubs head-on using this clarification.
At the same time, it is most likely that they will not try to put peruse on the rest of the digital ecosystem operating in the country. In any case, the next couple of months will provide a definite answer while most likely no new legislation will be introduced after this (partial change)
Guilt by Association
While both scenarios in Colombia hold little impact over the rest of the world of digital currencies, they still offer a grizzly reminder of the inner workings of governments. In the new reality of digital assets, some have tried to make the best of them, but other government’s officials and shot-callers have mostly been worried about them.
In Colombia, a problem that is more than valid and which includes scam organizations is being tackled by a much broader legislative push. It would be like having a problem with a particular eSports website and dealing with it by bearing down on the entire eSports association of the same game. The issue is not only that the reaction is wide, but that it comes with a very lacking sense of purpose.
Colombia, which has huge aspirations when it comes to the development of its tourism, cannot turn its back on digital currency. The same move would be very auto-destructive and a struggling economy like the one in the country needs benefits that come from things like remittance, new investment opportunities and much more that concedes with BTC.
Now, a measure taken by Superintendencia de Sociedades will not cut off Colombia from the rest of the bitcoin network, but even the possibility of this could do so much damage to the nation’s chance to capitalize on emerging opportunities.