On 20th December 2021, the Peruvian Congress came up with new legislation known as Crypto Asset Marketing Framework. The draft is in place for the regulation of cryptocurrency business in Peru.
The new legislation would further define the crypto asset and the duties that the Virtual Asset Service provider (VAPS) would take care of. The legislation is also aiming towards the legalization of the use of digital assets which they’d be incorporating and which the companies will be holding.
This is Peru’s first attempt towards the regulation of cryptocurrency interactions.
On 10th December, Podemos Peru, Jose Luis Elias Avalos, who is a member of a parliamentary group, Podemos Peru had introduced the legislation. In this draft, several important concepts from the cryptocurrency hemisphere have been defined. They include crypto assets, blockchain, virtual asset service providers (VAPS) and cryptography.
The new draft regulation introduced by Peru is intended to achieve the flowing regulations across the crypto markets.
- Creating a public registry for VASPs. A user can consult this registry at all times and figure out if the crypto platform or the exchange is registered to conduct business in the country.
- Herein, all VASPs should find themselves in adherence with the regulations for legally operating in Peru.
- The legislation is to compel the concerned companies to share with the users in their contract of services that cryptocurrencies are not a legal tender in Peru.
- The companies have to further share with their users that even while the Peruvian government regulates these assets, this is no guarantee against the risks that come alongside crypto investments.
- Now, we can consider the crypto assets that are used for the creation and incorporation of companies. The legislation will provide a legal base for these companies for holding cryptocurrency in Peru.
The draft will furthermore provide definition and valuation of the cryptocurrencies under the following circumstances:
- The first case is that the cryptocurrencies’ value should be recorded at the time of a company’s constitution.
- The second case is that if a company intends to sell its crypto assets, then these assets should be considered inventory assets.
- Otherwise, the assets should be considered intangible or property assets.
If we consider the case of other Latin American countries, Venezuela, Paraguay and Brazil have already established crypto legislation at the national level. El Salvador has similarly adopted the legal tender in 2021.
A few of the points have become clear with the introduction of the legislature of the Peruvian government:
- Bitcoin is an asset that features a book value and it can serve in the capital contribution for companies’ incorporation.
- The legislation nevertheless highlights that the cryptocurrencies’ use is the buyers’ absolute responsibility.
- Peru is among the four Latin American companies that have adopted the maximum use of certain cryptocurrencies including the Bitcoin.
The legislation has been presented following much parliamentary debate. This is just as in the case of Colombia, Panama, Uruguay, Brazil and Argentina, the other Latin American countries.
Before the legislation was put in place, it appeared on the Peruvian Congress’s official website under the name “Framework Law for the Commercialization of Cryptoassets”. Several points related to the growing cryptocurrency trade were herein included.
The document was in place for establishing the guidelines for the functioning and operation of the crypto-asset exchange service companies. This was to be achieved via technological platforms, which were based on the ideals of free competition and free market.
But there was a flipside to be considered.
The project has clarified that crypto assets are not considered legal tender across Peru. The other important indications presented by the project specify that acquiring and using cryptocurrencies and crypto assets are the buyers’ and owners’ absolute responsibilities. They need to stay informed of all risks associated with crypto trading.
The bill was in place for the regulation of Bitcoin exchange wallets and crypto exchanges operational across Peru.
The increasing adoption of cryptocurrencies including BTC across Peru had spurred the Peruvian legislators expressing the inclination towards regulating cryptocurrency trading. Towards the first half of 2021, Peru observed an increase in the excess of 600% in crypto trading on a YoY basis. La Republica, a local newspaper had reported this development.
The bill had also established a few of the specific requirements for commercial operations conducted using cryptocurrencies. This involved creating a new registry of service providers associated with the cryptographic industry.
The proposal stressed on the reporting of any suspicious operations to the Financial Intelligence Unit. These operations could be involving any crypto asset such as BTC. The proposal had furthermore established criminal liability in the acquisition and misuse of crypto cryptocurrencies and assets.
As per the proposal, all platforms operating Bitcoin were also to register before Peru’s the Superintendency of Banking and Insurance.
Let us consider why this bill was an utmost point of interest for all of Peru’s financial circles:
- Buda.com, an exchange platform operational in Peru has specified that Bitcoin is Peru’s maximum-used cryptocurrency. With each passing week, Bitcoin transactions in Peru increase by 20%.
- Statista has further specified that in 2021, Peru was the 11th country worldwide in using cryptocurrencies.
It is noteworthy that in 2018, Peru had announced that it plans to issue PeruCoin, to be a virtual currency. The value of PeruCoin was to be around USD 10. The announcement is yet to materialize and several industry experts believe it to be an investment scam.
With such concerns in place, the regulation of cryptocurrencies became an important matter in Peru. Cryptocurrency regulation is a safeguard against money laundering. Even as cryptocurrency trading was on a rise in Peru, criminal uses affected the Peruvian crypto community’s reputation.
Cryptocurrency is beyond national jurisdictions, and the odds of shady businesses being conducted increase through crypto trading. The legislation has been put in place as a counter measure to prevent criminal uses of this nature.
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