Bolivian central bank lifts Bitcoin and crypto ban

The Banco Central de Bolivia (BCB), Bolivia's central bank, is once again allowing financial institutions to use Bitcoin and cryptocurrencies. The central bank has effectively lifted the ban on Bitcoin and cryptocurrencies from December 2020. The aim of the measure is to modernize the South American country's financial sector. This is according to a recent press release from the BCB.

The BCB continuously promotes the modernization of the national payment system and the development of the payment infrastructure. The new regulation offers the population an additional mechanism to strengthen financial and commercial activities.
_{From the press release}

On December 15, 2020, the BCB decided to ban the use of cryptocurrencies as they are not legal tender. It cited the same arguments used by the European Central Bank or the German Federal Government, i.e. that cryptocurrencies do not fulfill the functions of a store of value and are also used in money laundering and other illegal activities.

The regulatory adjustment that has now been made, which repeals Board Resolution No. 144/202, which has been in force since the end of 2020, is the result of cooperation between the BCB, the Financial System Supervisory Authority (ASFI) and the Financial Intelligence Unit (UIF). Financial institutions are therefore once again permitted to carry out transactions with Bitcoin and cryptocurrencies. Trading in digital assets is now possible via authorized channels.

In this context, the BCB repeatedly emphasizes that its aim is to modernize the payment system.

This also applies to the head of the Bolivian Central Bank, Edwin Rojas.

As part of its policy, the BCB has continuously promoted the modernization of the national payment system and the development of the payment infrastructure, and its measures have enabled the introduction of technological innovations and new payment systems. In this framework, Board Resolution N°084/2024 will provide the population with an additional mechanism that will contribute to strengthening financial and commercial activities.
_{Edwin Rojas, BCB Chief Executive Officer}

Rojas also explained in a press conference that Bolivian citizens already trade around ten million dollars per month in cryptocurrencies. This figure is likely to increase significantly with the rule change, which will bring regulatory certainty.

Bolivia was one of the first countries to adopt a restrictive stance towards Bitcoin and cryptocurrencies ten years ago. Back in 2014, the South American country banned all means of payment that were not regulated or issued by the government. This effectively meant a ban on the possession and trading of digital assets.

Despite the latest relaxation, which came into force on 26 June 2024, the monetary authorities emphasize in the press release that only the local currency, the boliviano, is the legal tender and not virtual assets.

Bitcoin and co. are playing an increasingly important role in Central and South America. In 2021, El Salvador declared Bitcoin a legal tender and began building up its own Bitcoin reserves. Argentina, under President Javier Milei, also appears to be open to the use of Bitcoin and co. as money.

Decentralized, uncensorable money with a limited total amount is likely to be an interesting alternative for many Latin American citizens. In some Central and South American countries, the population suffers from high inflation rates, a weak financial infrastructure and capital controls.

The adoption of Bitcoin as a means of payment could gain further momentum in Latin America in the future. The large online bank Nubank, in which the investment legend Warren Buffett is invested with Berkshire Hathaway, announced a partnership with the Bitcoin lighting service provider Lightspark just a few days ago. Together, the companies want to roll out the Bitcoin Lighting network, which enables fast and cost-effective Bitcoin payments, for more than 100 million customers in Latin America.

In general, there is a noticeable trend that more and more countries that once banned Bitcoin and cryptocurrencies are opening up to the sector again. In Nigeria, too, the central bank rowed back at the end of last year. Since then, it has allowed banks to do business with companies from the crypto sector again - Blocktrainer.de reported.

These developments underline the prediction of some Bitcoin advocates that countries cannot permanently close themselves off from the industry and innovation surrounding Bitcoin without suffering considerable damage.