A presidential election means a fork in the road for Colombia’s crypto policy
A win for right-wing Federico Gutierrez would mean continuity for companies operating in the crypto space. A win for left-wing Gustavo Petro is much less clear - but doesn’t necessarily mean he elbows
Colombians head to the polls on 29 May to vote in a new president. Even though there could be a surprise win in the first round, most pollsters think that right-wing candidate Federico Gutierrez and left-wing Gustavo Petro will face off in a second round in June.
These two scenarios could impact a crypto policy started during out-going president Iván Duque’s presidency (2018-2022). Under Duque’s leadership, the Colombian financial regulator SFC in May 2021 set up a regulatory sandbox for testing crypto transactions. The idea with the SFC’s sandbox is to pilot how traditional banks and crypto exchanges can work together in joint venture-like partnerships.
To that end, Gemini partnered with Medellín-based Bancolombia. Binance partnered with Bogotá-based Davivienda. A digital wallet called Movii backed by Square is also involved. There are at least eight pairs of traditional banks married to a crypto exchange in total.
But where final regulations were supposed to be revealed in March of this year, regulators put the release on the back-burner because of electoral uncertainty. Under a Gutierrez scenario, the sandbox is likely to get a new appointee at the SFC who proposes continuity of what Duque’s administration has already built. Under a Petro scenario, things are much more difficult to tell for crypto companies and the banks tied to them.
A Federico Gutierrez presidency would benefit crypto in that Gutierrez will probably leave the crypto sandbox untouched and install a pro-continuity regulator to the SFC. It’s hard to see how crypto and banking innovation would get slowed by a Gutierrez administration. One concerning possibility is that Gutierrez installs a political appointee to the SFC as part of his coalition and the favors traded in the run-up to his electoral success. A politically-motivated SFC head lacking crypto competency would hurt. So, too, would a general lack of attention coming from the presidency. Tech is a priority for Colombia, according to Gutierrez’ program. But tech is a broad spectrum and Gutierrez has not made clear in public his views on crypto, Bitcoin or blockchain.
Under a Petro scenario, things are more complex. Petro is pro-Bitcoin and seems to get Bitcoin as a novel financial technology. He sees the benefit of blockchain technology for extending credit to the underclass and strengthening the country’s faulty land registry. Since Petro is laser-focused on rehabilitating Colombia's conflict-torn countryside, this latter project could be meaningful.
Since 2017, Gustavo Petro has tweeted about Bitcoin and blockchain use cases.
But Petro would come into the presidency as a verifiable outsider, a populist and a fierce adversary toward both Duque and Duque’s mentor Alvaro Uribe, a controversial former president. Going hard on traditional banks - whom he sees as enjoying an unfair oligopolistic structure and regulatory moat - would likely be a main order of business for Petro. That means crypto could get caught in the crosshairs. It’s also possible that Petro appoints an SFC head who pauses all of Duque’s banking policies - including the crypto regulatory sandbox. That would slow crypto big time. And it would prove to exchanges like Gemini and Binance that Colombia does not actually offer the legal certainty they might have assumed otherwise with their investments.
Even if Petro were to ultimately keep the Duque crypto innovation intact, it’s possible that he will look for a way to strip the ex-president’s brand off of existing government initiatives and instead Petro-ize crypto and Bitcoin policy in Colombia. One idea the presidential candidate has floated is to mine Bitcoin with the country’s abundant hydro power resources. It’s possible that he prioritizes data mining as a Petro-led digital infrastructure policy.
This latter policy would be good for investors who are seeking renewable resources of power for mining Bitcoin and other crypto. Petro is, after all, committed to reducing carbon emissions and exporting value-added products. Maybe exporting renewable energy - via Bitcoin - will be the creative policy solution he invents. But first, the favorite of the moment needs to win.