After a four-year ban, Bolivia authorized crypto payments in the country.
Bolivia’s central bank, Banco Central de Bolivia, has allowed local financial entities to conduct transactions with digital crypto assets to modernize its payment system, help Bolivia boost its struggling economy and align it with Latin American crypto regulations.
Specifically, the bank has quoted the recommendations of the Latin American Financial Action Task Force (GAFILAT), which has been pushing for crypto adoption in the region.
The earlier prohibition for financial institutions to engage in cryptocurrency transactions was enacted in December 2020. The measure practically banished virtual assets from the national payments system. In its press release at that time, the central bank said that the prohibition was necessary to protect the public from “risks, frauds and swindles,” warning that crypto trading has “the risk of creating economic losses” for those involved.
It is not that crypto was widely used in Bolivia before 2020. Bolivia’s Financial System Supervision Authority issued a resolution prohibiting the use of crypto not issued by the state, country or economic zone back in 2014 anyway, due to the lack of consumer protection and the potential for money laundering.
However, today, the regulator revoked its earlier decision. Now, cryptocurrencies can be legally used for merchant payments and other types of financial transactions.
Although banks can now transact in cryptocurrencies via approved electronic channels, the central bank also clarified that crypto is not a nationwide legal tender, as it is in, for instance, El Salvador. The difference is that Bitcoin, Ethereum, or any other altcoin or stablecoin is not given the status of an official currency in the country, and businesses are not obliged to accept them as payment.
The regulator also remains cautious about crypto risks. Thus, Banco Central de Bolivia plans to incorporate information on the associated risks into its Economic and Financial Education Plan to educate the public on handling cryptocurrencies safely and understanding the potential dangers.
