The executive branch of Uruguay has submitted a bill to Congress that aims to clarify how crypto-related activities will be regulated in the South American country. The bill will give the country's central bank legal powers to regulate cryptocurrencies if approved.
The bill is currently awaiting approval by both the Chamber of Deputies and the Chamber of the Senate for it to become law.
The document refers to virtual assets as securities and categorizes them into four types: tradable assets, stablecoins, governance tokens, and debt tokens.
On top of that, the bill proposes to create a new category of companies for virtual asset service providers (VASPs). It further seeks to amend the organic charter of the Central Bank of Uruguay (BCU) and put VASPs under the supervision of the central bank entity, the Financial Services Superintendence (SSF).
SSF will ensure that malicious elements do not use crypto assets to bypass the country's anti-money laundering (AML) and counter-terrorism financing (CFT) safeguards. Speaking of AML & CFT safeguards, Uruguay hasn’t yet adopted the FATF Travel Rule, but if the country green-lights the crypto bill, it will adopt the Crypto Travel Rule sooner or later.
Introduced on Sept 5, the proposed bill aims to amend the Securities Market Law and treat crypto assets as book-entry securities.
Such a treatment means crypto can only be issued by a registered entity that complies with laws and regulations. With this, the document introduces another class of operators, the “virtual asset issuer.”
This new organization will be in addition to companies facilitating the purchase and exchange of virtual assets, custody providers, and third parties that lend financial services related to the sale of a crypto asset that the text establishes as part of this asset class.
“With the proposed amendments, both the previously regulated subjects and the new incorporated entities that operate with virtual assets will be subject to the supervisory and control powers of the Central Bank of Uruguay,” states the bill.
Last year in August, Uruguayan Senator Juan Sartori introduced a bill to allow the use of crypto as payments and regulate their use in the country. Yet, so far, it hasn't been successful. Then the Central Bank of Uruguay issued Binance a summon due to its offering of savings-oriented crypto-based financial products.
Towards the end of 2021, the central bank started working on a plan to lay the foundation for regulating companies that offer crypto-related services.
The South American country has now introduced a new cryptocurrency bill that will address the gray area in its crypto sector.
Interestingly, Uruguay’s neighboring country Brazil, the largest economy in the region, is also looking to change its legal framework to recognize crypto tokens as securities & bring them under the SEC's control.
The bill's final version was approved by the Senate in April 2022 and needs Congress revision before being signed by the president.
Meanwhile, in another South American country, Paraguay's President Mario Abdo has vetoed a proposed crypto regulation bill, stating crypto mining is an “energy-intensive” low-value-added activity. The bill has since been returned to Congress to be approved again or to be rejected.
It is to be seen if Uruguay gets ahead of Paraguay and Brazil in giving legal recognition to virtual assets. That said, a comprehensive crypto bill is a good start, nonetheless.
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