Some rumors floating around last week indicated that Colombian authorities might seek to ban bitcoin transactions. Specifically, the report originated from the El Tiempo publication, which suggests a circular was due out this week.
That document is available as of today (posted here, item #29), and the good news is that bitcoin, nor bitcoin transactions have not been banned.
The Financial Supervisory Authority of Colombia instead took the opportunity to warn the public of the risks of getting involved with bitcoin, much like many other companies have done at this juncture.
The document, entitled Risk of transactions with ‘Virtual Currency’ addresses points we’ve seen time and time again:
- Bitcoin “is not an asset that has the legal equivalence legal tender in Colombia since it was not recognized as currency in the country.”
- Digital currency is not backed by physical assets or a central bank.
- Users are exposed to volatility.
- Bitcoin is not governed by Colombian Law. As such, users may incur losses due to lack of protection from the Colombian government.
- Transactional platforms related to bitcoin are registered in multiple jurisdictions, so oversight and regulation is above the scope of Colombian law.
- Digital currency can be used for illegal or fraudulent purposes (such as terror financing).
- Users are exposed to hacking, theft of digital currency, and transactions cannot be reversed.
- Users who trade digital currency “are not covered by any private or government guarantee” (such as the FDIC in the U.S.).
- People are not legally obligated to recognize bitcoin and digital currency as a legal form of payment.
- “There are no mechanisms to force compliance of transactions with [digital currency], which significantly increases the possibility of a risk of default.”
The document is closed with the warning that “supervised entities are not authorized to guard , invest or mediate” digital currency and its usage. As such, users should be aware of and accept the risks involved. [Original Document]
