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Peru Takes Steps Toward Cryptocurrency Regulation

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As Peru continues to navigate the world of cryptocurrency, the country has made significant strides towards regulating digital currency transactions. Despite being ranked 76th in the Global Innovation Index in 2023, Peru’s active economy and strong export sector make it an attractive player in the global financial landscape.

The Road to Regulation

In December 2021, Peru introduced a draft bill aimed at defining and regulating cryptocurrency transactions for the first time. The proposed law seeks to provide a clearer regulatory framework for the crypto sector, but its progress has been met with opposition. In June 2024, the Central Bank of Peru partnered with India’s National Payments Corporation to create a system similar to India’s UPI, targeting financial inclusion and payment interoperability.

A Glimpse into Crypto Regulation

Crypto assets in Peru exist in a legal grey area, but recent decrees have brought some clarity. A supreme decree issued in July 2023 designated crypto exchanges as Virtual Asset Service Providers (VASPs), requiring them to report to the Financial Intelligence Unit. The Central Reserve Bank of Peru has also released reports on the benefits and risks of creating a digital currency.

Micro Bitcoin Economies in Peruvian Villages

In remote Peruvian villages, Bitcoin is making a significant impact on unbanked communities. Motiv, an NGO, has been at the forefront of this change since 2019, educating residents on using Bitcoin. The initiative has established 16 Bitcoin microeconomies, where Bitcoin serves as the primary currency for buying and selling goods and services.

Peru’s New Cryptocurrency Asset Law Explained

The proposed law aims to define what a crypto asset is, outline responsibilities of virtual asset service providers, and create a public registry for these providers. The law also requires companies to inform users that cryptocurrencies are not considered legal tender in the country and demands education on the risks involved.

Peru Crypto Tax Framework Explained

Crypto assets in Peru are taxed as non-physical items, with capital gains tax applying at 29.5% for companies and individuals selling or transferring crypto regularly. However, VAT and Financial Transactions Tax do not apply to crypto transactions unless they involve cash deposits.

Timeline of Crypto Regulation Evolution in Peru

  • July 2023: The government issued a supreme decree making crypto exchanges Virtual Asset Service Providers.
  • March 2023: The Central Reserve Bank of Peru released a report on the benefits and risks of creating a digital currency.
  • December 2021: A draft law was introduced to regulate cryptocurrency activities in Peru.
  • 2018: Peru announced PeruCoin, a virtual currency worth about $10 USD, but the project stalled due to suspected fraud.

Conclusion

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As Peru navigates the uncertain waters of crypto regulation, clarity on the status is crucial for the country’s economic growth. While not explicitly illegal, crypto assets operate in a legal grey area, and recent decrees aim to bring some order to the sector. The government’s push for new regulations faces challenges, but initiatives like Motiv’s Bitcoin microeconomies highlight crypto’s practical impact in unbanked regions.