Peru is entering the world of cryptocurrency with new regulations. Popular for its active economy, this South American country has more than 32 million people. Peru relies heavily on exports such as copper, gold, zinc, textiles and fishmeal. The country mainly trades with the USA, China, Brazil and Chile. Despite being ranked 76th in the Global Innovation Index in 2023, a large part of the country’s workforce – at least 70% of the total workforce – works in informal jobs.
It was in December 2021 that Peru first introduced a new draft bill to define and regulate cryptocurrency transactions. It aims to provide a clearer regulatory framework for the crypto sector. Nevertheless, the digital currencies are not backed by Peru’s 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).
Would the big intuition taken with the introduction of the new crypto law lead to the complete integration of digital finance into the country’s economic landscape? Only time will tell.
1. Crypto Regulation in Peru: A General Overview
In Peru, crypto assets are still a gray area. Is it illegal? This is a complex question. Whether it is legal or illegal is not clearly defined by law. This means you can buy and trade crypto in the country. But there are some limitations. Advertising of financial services linked to crypto is restricted unless you are a regulated financial institution. The Peruvian government is considering a new law to regulate crypto. Unfortunately, that move currently faces opposition. Recently, a decree made virtual asset service providers subject to anti-money laundering regulations. The degree requires these service providers to follow strict compliance measures.
2. Cryptoregulation in Peru: What’s New
February 20, 2024: Peru announced plans for an AI regulatory framework. It introduced a new bill in Congress.
February 28, 2024: The Lima Stock Exchange added three bitcoin spot ETFs to diversify investment options. These ETFs include iShares Bitcoin Trust’s IBIT, Invesco Galaxy Bictoin’s BTCO and Vaneck Bitcoin Trust’s HODL.
May 2, 2024: The Council of Ministers released a draft regulation for AI promotion. The draft defines key AI-related terms. And it highlights the potential benefits of AI.
June 7, 2024: The Central Bank of Peru has partnered with India’s National Payments Corporation to create a system similar to India’s UPI. The main aim of the move is to boost financial inclusion. It also aims to improve payment interoperability.
3. 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. They travel to isolated regions to educate residents about the use of Bitcoin. Since late 2020, the NGO has established 16 Bictoin micro-economies, where Bitcoin serves as the primary currency for buying and selling goods and services. This initiative is essential in Peru, where more than 50% of the population is unbanked. Most transactions in Peru are in cash, using the Peruvian sol, which has faced significant inflation. In June 2024, the annual inflation rate in Lima rose to 2.3%, driven by higher costs in transport and housing. The Consumer Price Index also saw a slight increase of 0.12% month-on-month.
4. Peru’s new cryptocurrency asset law explained
In Peru, the new crypto-asset law was introduced in December 2021. The proposed law aims to define what a crypto-asset is. It also seeks to outline the responsibilities of virtual asset service providers. It suggests creating a public register for these service providers. The move will allow users to verify their legitimacy. In particular, the law requires these service providers to inform users that cryptocurrencies are not considered legal tender in the country. And it also requires these service providers to educate users about the risk involved in dealing with crypto-assets. Interestingly, the law allows companies to incorporate and hold crypto-assets. The companies are allowed to treat them as inventory or intangible assets depending on their intended use. Nevertheless, the law does not recognize bitcoin as legal tender.
5. Peru Crypto Tax Framework Explained
In Peru, crypto-assets are seen as a non-physical item that can be transferred or sold, such as patents or copyrights.
Companies: For Peruvian companies, the sale or transfer of crypto as capital gain is taxed at 29.5%.
Individuals: For individuals, these transactions are not taxed unless they are done regularly.
VAT & FTT: Crypto transactions are not subject to VAT as they are not listed as taxable transactions. The Financial Transaction Tax (FTT) does apply because crypto is often transferred via digital wallets. However, if crypto is exchanged for cash and deposited in a local bank, FTT will apply.
6. Timeline of Crypto Regulation Evolution in Peru
2018: Peru announced PeruCoin, a virtual currency worth around $10 USD. The project has stalled and is suspected to be a scam. This has raised concerns about cryptocurrencies.
December 2021: A draft law was introduced to regulate cryptocurrency activities in Peru.
March 2023: The Central Reserve Bank of Peru released a report on the benefits and risks of creating a digital currency.
July 2023: The government issued a supreme decree that made crypto exchanges virtual asset service providers. PSAVs are required to report to the Financial Intelligence Unit.
End note
In 2024, Peru finds itself navigating uncertain waters over crypto regulation. Although not outright illegal, crypto-assets operate in a legal gray area in the country. The government’s push for new regulations faces challenges, despite recent decrees on anti-money laundering measures for crypto service providers. Meanwhile, initiatives like Motiv’s Bitcoin Microeconomy highlight the practical impact of crypto in unbanked regions. Clarity on the crypto regulatory status is very important if the country has plans to overcome its economic limitations by using the digital economic possibilities.
Also Read: Crypto Regulations in France 2024 – A European Crypto Hub
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
UnCirculars – Cutting through the noise, delivering unbiased crypto news
