Financial Crime World

Peru Moves Closer to Regulating Cryptocurrency, But Uncertainty Remains

Lima, Peru - The Peruvian government has taken steps towards regulating the cryptocurrency sector, but uncertainty still surrounds the future of cryptocurrency regulation in the country.

A Complex Regulatory Environment

Despite being ranked 76th in the Global Innovation Index in 2023, Peru’s economy is heavily reliant on exports such as copper, gold, and textiles. This has led to a lack of clarity around the legal status of cryptocurrencies, with many regarding them as a grey area.

  • At least 70% of Peru’s workforce works in informal jobs, contributing to this uncertainty.
  • A significant portion of the country’s economy operates outside of traditional financial systems, making it challenging for regulators to establish clear guidelines.

The Road to Regulation

In December 2021, a draft bill was introduced to define and regulate cryptocurrency transactions for the first time. However, major financial institutions such as the Central Reserve Bank of Peru (BCRP), the Securities Market Agency (SMV), and the Banking and Insurance and Pension Fund Manager Agency (SBS) have not backed digital currencies.

Recent Developments

  • In June 2024, Peru partnered with India’s National Payments Corporation to create a system similar to India’s UPI, aimed at boosting financial inclusion and enhancing payment interoperability.
  • The country also added three bitcoin spot ETFs to the Lima Stock Exchange, diversifying investment options for investors.

New Laws and Regulations

Peru’s new cryptocurrency asset law aims to define what a crypto asset is and outline the responsibilities of virtual asset service providers. However, it does not recognize bitcoin as legal tender and requires companies to educate users about the risks involved in dealing with cryptocurrencies.

  • The country’s crypto tax framework treats cryptocurrencies as non-physical items that can be transferred or sold like patents or copyrights.
  • Companies selling or transferring crypto are taxed at 29.5%, while individuals are not taxed unless they do so regularly.

Ongoing Challenges

Despite these developments, uncertainty remains around the future of cryptocurrency regulation in Peru. Clarity is crucial if the country hopes to overcome its economic limitations using digital economic possibilities.

  • In July 2023, the government issued a supreme decree making crypto exchanges Virtual Asset Service Providers (VASPs), which must report to the Financial Intelligence Unit.
  • The Central Reserve Bank of Peru also released a report on the benefits and risks of creating a digital currency in March 2023.