Joaquín Fernández arrived in the world of cryptocurrencies through a friend. The 25-year-old university student was looking for an option to invest and came across a crypto platform. “I didn’t want to leave my savings in an account, but I didn’t have a lot of money to invest either,” said Fernández in dialogue with Coffee & Business.
After meditating together with his family on the risk he could take with an item unknown to him, he took US$1,000 and began to operate together with some friends with Ethereum. “It didn’t give me much return, so I decided to stop trading, but keep the cryptocurrencies” he had acquired, he explained.
When Fernández began to venture into this area, “cryptocurrencies had reached their peak.” A few months later, digital assets began to record violent fluctuations. Bitcoin —the flagship cryptocurrency— registered, at the end of the first half of 2022, 60% losses. The Ether, another of the significant currencies, fell 6% in 24 hours alone over the past week.
The volatility of the item and the debate on regulation
Part of these abrupt behaviors in the market were due to the Terra Luna scandala cryptocurrency that, although it had been standing out since December 2021, lost 98% of its value in just 48 hours in the month of May this year. Frightened due to these movements, many operators around the world withdrew millions of dollars from this area and left different cryptocurrencies without support.
The shocks suffered by the digital currency market reinstated the debate on the regulation of these assetsa rugged issue that the Central Bank of Uruguay (BCU) has been studying since the end of 2021.
“The cryptocurrency market is characterized by the volatility”, asserted the legal director of Ripio, Alejandro Rothamel. Ripio is a virtual wallet to buy and sell cryptocurrencies with a presence in Uruguay.
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Terra Luna cryptocurrency lost 98% of its value in 48 hours
The executive explained that what happened during the last year with cryptocurrencies led to “put in vogue” the regulation of the market blockchain —technology by which cryptocurrency transactions take place. “As happened with the appearance of the Internet in the early 90’s and every time a disruptive technology emerges” how to fit these activities into a regulatory framework is discussed, Rothamel pointed out.
The expert in legal matters indicated that at present it is the European regulations that set the course. “Basically it is a norm that obliges exchanges (cryptocurrency exchange platforms) to collect information from its users and also information from people outside the platform. This does not point so much to the industry, but to the technology. And this is a breaking point”, he explained.
As far as Uruguay is concerned, the BCU has been developing a conceptual framework for regulation. As stated to Coffee & Business the regulatory body through its Communication area, the approach proposed by the conceptual framework gave rise to a draft law formulated at the end of 2021, which was sent to Parliament through the Ministry of Economy. In this way, “virtual asset service providers would enter the regulation and supervision perimeter of the BCU’s Superintendency of Financial Services.”
In turn, since Ripio, they have had exchanges with the BCU to contribute to this regulatory framework, according to Rothamel. “There is a lot of permeability (by the BCU) to the perception of the industry and to what the industry says; has a genuine interest in the exchange developing in this country,” the executive said.
The case that can accelerate regulation in Uruguay
In this context of volatility, Both Ripio and Binance, one of the main cryptocurrency exchange platforms in the world that also operates in Uruguay, are in favor of the regulation of digital assets.
However, in recent weeks the BCU caught the attention of Binance for spreading advertising to “buy cryptocurrencies under an investment with savings characteristics”. Through the Official Gazette, the state body called on the platform to “formulate its defense and articulate its defense” before the episode.
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Binance is a cryptocurrency exchange platform
In parallel, the BCU issued a resolution for the dissemination of “advertising carried out on social networks and other mass media, by people or companies operating in the market in the form of technological platforms, or making use of them, where they offer the public the option of buy cryptocurrencies under an investment with saving features, as well as the promise of certain rates of return on the investment”.
In the statement, the Superintendence of Financial Services of the BCU clarifies that “the call to the general public for the application of their savings, can only be done under the authorized form for deposits through financial intermediation institutions authorized to collect deposits in the market or as an issuer registered in the stock market register”.
Given the call for attention from the regulatory body, Coffee & Business consulted Binance, representatives of the company preferred to send the following statement: “Binance is aware of the communication from the Central Bank of Uruguay and has already started a dialogue with the authority. Binance reinforces that it is leading the way globally in the development of the blockchain and crypto ecosystem, working collaboratively with regulators, legislators, governments, and law enforcement authorities to ensure the most secure environment. Binance also highlights that she is fully committed to compliance and believes that regulation is the only way the industry can expand and reach the general public.”
Asked if this episode led to accelerating their cryptocurrency regulation work in Uruguaythe BCU responded through its Communication area that, although the Superintendence of Financial Services has a strategic plan and an annual activity plan where the regulatory objectives are established, the fact carried out by Binance “may introduce modifications”.
