Chile - Government officials are slow-walking a fintech law that might include crypto
A Fintech law is being debated in congress. A bank lobby wants definitions for crypto to be baked in.
Politics in Chile have been noisier than usual lately. But beneath the rowdy layer of a young reformist voted into the presidency, there’s a quiet push to build and regulate financial technologies.
Chileans voted into office a 35-year-old Gabriel Boric at the end of last year. Boric is a social activist who promised severe reforms to economic policy that many see as the machinery that produces inequality. Separately, a constitutional convention is re-writing the nation’s rights.
Through the noise, one can find Chile’s FinTech Law working its way through the legislature. But blockchain technology, especially Bitcoin, seems scarce in the discourse. Conventional wisdom would say that Chile is stuck in the past compared to Mexico, Brazil or even Colombia. But the slow pacing of Chile’s regulatory framework could actually be good for crypto companies and adoption.
It was former president Sebastian Piñera who first sent congress a bill in September, 2021 that would create a regulatory framework for Fintechs. Congress is still chewing on Piñera’s legislation. Recently, Boric’s finance minister Mario Marcel asked for adjustments. In March of this year, José Manuel Mena sent a series of proposals to the Senate finance committee that seek to define crypto assets in the FinTech law. But the jury is still out on whether crypto assets like Bitcoin will be included and how.
What this means is that Chile is attempting to slow-walk a body of laws that would allow various financial technologies and companies to flourish. It’s likely to be a highly regulated arena and it’s still not clear whether or not Boric’s government will accommodate Bitcoin and crypto securities.
Buda, a crypto exchange founded by Agustín Feuerhake and Pablo Gonzalez, has found some way to navigate in Chile’s regulatory environment but not without significant obstacles. In 2018, State Bank of Chile canceled the accounts of Buda and two other exchanges. And yet, Buda is still processing crypto transactions. In 2019, the company began processing Lightning Network payments through the exchange. Some of Buda’s transactions involve Venezuelan migrant remittances from Chile to family in Venezuela.
And the legislation isn’t the only policy measure in Chile that matters. Shortly after Piñera sent the bill to congress, Chile’s Central Bank set up a CBDC working group. Marcel was Chile’s Central Banker before joining Boric’s finance ministry. As far back as 2019, Marcel was writing favorably about CBDCs for cross border payments and casting skepticism on Proof-of-Work protocols (like Bitcoin) and Proof-of-Stake protocols (like Ethereum).
The absence of a more fervent national conversation around Bitcoin or Ethereum projects might seem like Chile is an unfriendly policy regime. But the lack of politicization could actually be good for adoption of Bitcoin and other useful blockchains.
One concerning scenario, of course, is Boric and his mandate. Environmentalists, conservationists, and Chile’s less fortunate want to see Boric hit hard against anything that might be associated with intensive energy consumption and financial inequality. If Bitcoin and crypto get targeted by members of Boric’s base, it seems hard to imagine how a Proof-of-Work protocol would survive Chile’s delicate constitutional transformation. Unless the noise and distraction is what allows it to survive.