Latin America cryptocurrency heavyweight talks Gibraltar license, Argentina

Mexican cryptocurrency exchange Bitso is today one of the biggest of its kind in Latin America. 

In February the company expanded into Argentina – where it has already taken a leading position in the local market. Bitso now has Brazil in its crosshairs.

Founded in 2013, Bitso last year obtained a full distributed ledger technology, or DLT, license from the Gibraltar Financial Services Commission. This made the platform, today with more than 1mn users, the first in the region to become overseen by the regulatory authority and the sixth in the world to obtain such a license.  

Introduced in January 2018, Gibraltar’s DLT legislation is the world’s first purpose-built regulatory framework for businesses using blockchain or DLT. According to the government of the British overseas territory, “the framework has been designed to provide an efficient, safe and innovative regulatory framework for firms that use DLT for the transmission or storage of value belonging to others.” 

To talk about the move and more, BNamericas spoke with Andrés Ondarra, country manager for Bitso in Argentina.

This is the first of a two-part interview.

BNamericas: Bitso was the first cryptocurrency exchange in Latin America to obtain a regulatory license from authorities in Gibraltar. Can you tell us a little about the process and why the company decided to do this?

Ondarra: The Gibraltar Financial Services Commission granted Bitso a distributed technology license. This license confirms that Bitso complies with security and transparency standards which offers its users an unprecedented level of reliability and compliance. It is a legal framework built specifically for activities like ours, with consumer protection and security a priority.

To obtain the license, Bitso complied with a series of strict regulatory principles of corporate governance, capital requirements, compliance, security and many other guidelines that ensure that the services we offer meet the highest standards.

Along the same lines, we have established requirements that take into account the interests and well-being of our users. Our communications with them are clear, honest and fair.

We have a strict money laundering prevention – AML – and know your customer – KYC – policy.

In this sense, we believe that regulations are a way to provide greater consistency, security and transparency to the crypto market. For this reason, at Bitso we are always respectful towards them and we abide by them, and not only that, but we believe that they are necessary to expand the penetration of this ecosystem.

In terms of Mexico, Bitso has actively participated in the creation of the law to regulate financial technology institutions, better known as the fintech law. The idea of creating a law for the fintech sector came out of a trip made by the ministry of finance and public credit [SHCP] to San Francisco in 2016. On that trip, the SHCP delegation met with Bay Area crowdfunding, cryptocurrency and payments fintechs and accelerators. On its return, the SHCP summoned a group of Mexican companies from the fintech sector, including Bitso, to hear their concerns. The result of this meeting, almost three years later, was the fintech law.

The legal initiative is an attempt to protect a booming industry and outline the rules of the game. It is a law that can be fine-tuned, but, unlike the prohibitive regulatory reactions seen in other countries, in Mexico it is now a legally permitted activity. It is a law that provides certainty to companies in the sector, provides guarantees to the user, and allows fintech companies to compete in the financial sector.

BNamericas: In terms of local legislation in the field of cryptocurrency platforms, what is the current situation in Argentina?

Ondarra: Argentina does not have a fintech law so far, but in January 2020 the central bank decided to regulate certain fintech verticals under the financial entities law, which is legislation applicable to banks. This measure was in response to claims made by traditional banks, which had argued that fintech companies were not subject to - until January 2020 - the same tax or regulatory obligations as they were.

In the event the central bank decides to sanction any entity for non-compliance, article No. 41 of the financial entities law provides for various actions, from warnings to fines and operational suspensions.

Bitso joined, in 2019, the blockchain segment of the Argentine central bank’s innovation group. And we hold a proactive stance regarding regulations, just as we have done in Mexico, since we firmly believe that, with efficient regulation, greater financial inclusion and an increase in the formalization of a country's economic activity can be achieved.

BNamericas: The Argentine government has implemented restrictions on the flow of capital. Has Bitso - that is, its clients in Argentina - been impacted by these restrictions?

Ondarra: In one way or another, all Argentines are impacted by this measure. Hence, in part, we have identified an acceleration in the trend of adoption of cryptocurrencies in times of greatest uncertainty, particularly for Argentines when they face restrictions on their freedom to access different savings and investment alternatives.