With the exception of El Salvador, which adopted bitcoin as a legal tender currency in 2021, there is no standard regulation for cryptocurrency trading in the world.
In Guatemala, it is every individual or legal person who decides to invest in this type of transaction that is responsible for its own actions.
According to the Superintendency of Banks, “according to the current monetary law of the country, the Quetzal is the only currency of legal tender in the national territory. Cryptocurrencies, such as bitcoin, ethereum, ripple and the like, are unrecognized and do not have the corresponding backing. Nor are they authorized to be used as means of payment in Guatemala.
People want easy, quick returns. Since there is no regulation, there is a risk that third parties or a cryptocurrency company will cease to exist overnight and there is no local support that can give traceability and demand that the user return some of the money he invested, says José Amado, manager of the firm’s Digital Identity Practice, Sistemas Aplicativos (Sisap).
Thus, the first risk to which users are exposed is associated with regulation, since, in the absence of a specific legal framework, local banks do not offer services such as custodians of cryptocurrencies or savings accounts in digital assets. Faced with this situation, interested users turn to international platforms, which increases the risk of scams and fraud. The “nebula” surrounding the traceability of transactions in cryptocurrencies is added, according to the expert, their origin and destination, which has facilitated illicit activities such as extortion or money laundering. In this regard, research and follow-up is a challenge for the authorities.
Neither prohibited nor permitted
While the use and trade of cryptocurrencies is not explicitly regulated in Guatemala, it is not prohibited either. Consequently, nothing prevents people and companies from buying, selling or exchanging cryptocurrencies.
In order for this type of currency to be used as a legal tender currency in Guatemala, it would be necessary for Congress to adopt specific legislation regulating its circulation, tax treatment and acceptance as a means of payment. This law would have to define how transactions are taxed in cryptocurrencies and establish rules for their integration into the formal economy.
To avoid market volatility, the alternative would be to adopt the scoins or digital currencies backed by reserves in quetzales or other stable currency.
If they could be an accepted currency, regulations would be needed to protect users and define how to proceed in the event of disputes. In addition, the regulations should stipulate the responsibilities of shops and consumers in the management of these transactions.
The StableCoin, is a type of cryptocurrency that has an asset backup. This backrest can be complete or partial. Two examples of Stable coin are USD Coin (USDC) and Pax Dollar (USDP), which maintain a parity of 1 to 1 with the US dollar, explains German López, a member of the Cybersecurity Banking Community (Bancert). In this case, the Guatemalan government could implement a licensing regulation for cryptocurrency platforms, which would ensure that they meet criteria of safety, solvency and transparency. This regulation would be key to these companies operating in a safe and transparent manner in the country.
It is also crucial that these platforms implement identity verification and reporting suspicious transactions procedures to prevent money laundering and finance illicit activities.
In addition, the regulations could require cryptocurrency platforms to submit regular audits to demonstrate that they have sufficient funds to cover obligations to their customers and that their operations are secure. This would also come to protect users in case of liquidity problems, concludes Congressman Jorge Mario Villagrán, president of the National Security Affairs Committee of the Congress of the Republic.
Complaints without progress
Prosecutor Raúl Pérez Bámaca, of the Public Prosecutor ' s Office against Transnational Crimes, confirms that, in some cases, this prosecutor ' s office has initiated with the investigation of complaints of this type of act because of its possible transnational connection, however, since the place of the commission of the crime cannot be determined, the proceedings have therefore been closed. Therefore, in their view, financial institutions and public regulatory entities must take immediate action.
The lack of clear laws makes it difficult to have a regulatory infrastructure that detects and slows fraudulent schemes, such as the Ponzi or the false ICOs (Intell Currency Offers, and financial frauds that often involve misleading promises of high yields. These deception typifications can affect unsuspecting investors. Here, financial education is key to avoid falling into these deceptions, Villagrán says.
For now, the use of cryptocurrencies worldwide is very low as a means of payment, it is more used by investors who would bet on the price change of these, for example, bitcoin, where they take all risks. An alternative being studied worldwide is for central banks to issue their own digital currency, says Álvaro González Ricci, president of Banguat.
The head of the central bank adds that at the global level there is no consensus whether this type of activity should be regulated. In those countries where this has proliferated, legal changes have been made where what is sought is the protection of the user, mainly when used as a means of payment, but not when they are used as a speculative investment instrument.
It is a technological challenge for any company that would like to use cryptocurrencies, not just for financial institutions. A digital culture within the population is also needed for acceptance. In general, cryptocurrencies have not proliferated as a means of payment, precisely because of the lack of custom or trust in the population, concludes González Ricci.
How do cryptomarkets operate?
In Guatemala, companies operating with cryptocurrencies are usually exchange platforms (exchanges), financial technology companies (Fintech) and international electronic wallet or e-wallet operators. However, as said earlier, these activities are not regulated under a specific law in the country, says Lopez.
Some Fintech ecosystem companies operating with digital payment solutions in Guatemala have begun offering cryptocurrency exchange services. And although these companies try to comply with international regulations of KYC (Know Your Customer) and AML (Antilavado of Money), fundamental components in the fight against financial crime and the lack of national legislation puts them in a situation of legal uncertainty, Villagrán says.
He adds that authorities face major challenges in trying to track transactions that are made on blockchain platforms or blockchains, which use cryptocurrencies, as they require advanced forensic tools and trained personnel in analyzing those digital assets. Moreover, the transnational nature of cryptocurrencies complicates international cooperation, especially if the country lacks specific treaties for the exchange of information in cases of cybercrime.
Currently, most banks in the financial system reject cryptocurrencies directly because of this lack of specific regulation. However, some are beginning to do so through partnerships with Fintech, which act as bridges between traditional financial services and the world of cryptocurrencies.
In the experience of Fintech INBESTGO, its compliance team works directly with its counterparts from allied banks to prevent fraud and money laundering. This has been key in the development of the ecosystem in Guatemala, says David Aw. co-founder and CEO of the company in reference, a pioneer in this type of negotiation.
Specific regulation for cryptocurrencies?
Aw explains that on this platform they have implemented international compliance standards, such as KYC and AML policies, even without mandatory local regulation. This ensures that they operate in a transparent and responsible manner. However, they believe that adequate regulation is necessary and beneficial to build confidence and security, both for users and businesses.
The regulations must have licensing requirements for crypto companies. This exists privately with banks. However, having it clear speeds up these kinds of ventures. Similarly, it must have cybersecurity standards.
And although the country discusses the creation of a cybersecurity law, interviewees agree that legislation regulating the use of cryptocurrencies requires different regulations. This is because the first focuses on the defence and resilience of computer networks and systems, while the second focuses on the financial and digital trade aspects of these technologies.
Alert signs with cryptocurrencies
According to the sources consulted, cryptocurrencies bring innovation, but also carry risks that users should know, such as scams or fraudulent schemes, loss of private keys that can lead to total loss of funds, as well as cyberattacks or phishing; attempts to gain access to user accounts or wallets. So far, justice operators in the State of Guatemala do not have technological equipment to follow this type of asset.
- Exorbitant returns: Offers that promise attractive profits, even 200%, especially yields above 80-90% are already alarming.
- Eccentric characters: They show luxurious cars, expensive brand clothes and an ostentatious style. His goal is to convince through his image and appear successful.
- Deals -irreistible: They use phrases like: “It’s time to buy because it’s on off.” They lack legal support, clear documentation or listing on recognized platforms.
- Apparently legal websites: Design professional pages to appear confident. It should be borne in mind that having a website, apparently, well done, does not guarantee security or authenticity.
This article was translated after appearing in Prensa Libre