Crypto-funded debit card in Colombia

Regulatory Sandbox (La Arenera): The closest mechanism for innovation is the SFC's La Arenera, a regulatory sandbox established under Circular Externa 021 de 2023. This allows financial entities (and in certain cases, non-supervised entities in partnership with supervised ones) to test innovative financial services, including those involving crypto assets, under a controlled environment with temporary waivers or specific authorizations. However, participating in La Arenera does not exempt a token from being classified as a security; rather, it allows for a structured dialogue and potential adaptation of regulations if a security token is being tested.

Exchanges (Virtual Asset Service Providers - VASPs):

Interaction with Financial System: If an exchange seeks to offer fiat currency on/off-ramps through Colombian banks, it generally needs to participate in the SFC's Regulatory Sandbox ("La Arenera") in partnership with a regulated financial institution. This sandbox allows for supervised pilot programs.

Registration Regime (AML/CFT): Colombia primarily operates a registration regime for AML/CFT purposes. All VASPs, regardless of whether they are licensed or participating in the sandbox, are considered "obliged entities" by the Unidad de Información y Análisis Financiero (UIAF) and must:

Implement robust AML/CFT policies and procedures.

Similar to exchanges, there's no specific license for crypto custody services. If custody is offered in a way that interacts with the traditional financial system or involves managing significant client funds, participation in the La Arenera sandbox would be the route for formal approval and supervision.

If a payment processor facilitates payments using virtual assets, and these operations require integration with traditional financial services or involve holding customer fiat funds, they would also look towards the La Arenera sandbox for formal supervision. Standalone crypto payment solutions that don't touch fiat are generally not licensed by the SFC but still fall under AML/CFT obligations.

General Operation: VASPs operating without direct interaction with the traditional financial system (e.g., direct fiat on/off-ramps via banks) are primarily subject to AML/CFT obligations but are not licensed by the SFC. They operate in a somewhat "grey area" from a licensing perspective, though the UIAF views them as obliged entities for AML purposes.

AML/CFT Obligations: All VASPs are subject to Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) requirements, regardless of whether they are licensed or not.

Ongoing Development: Ley 2143 of 2021 mandated the SFC to propose a comprehensive regulatory framework for crypto assets, indicating a future move towards a more formal licensing system.

Law 526 of 1999: This law created the Financial Information and Analysis Unit (UIAF) and established its functions as Colombia's Financial Intelligence Unit (FIU). It is the foundational law for AML/CFT in the country.

Decree 1068 of 2015 (as modified by Decree 169 of 2020): This crucial decree explicitly incorporates "virtual assets" into the scope of assets and operations that the UIAF must analyze to prevent money laundering and terrorism financing. It empowers the UIAF to establish reporting requirements for entities involved in operations with virtual assets.

Resolución 314 de 2021 de la UIAF: Por la cual se imparten instrucciones relacionadas con el SARLAFT a los proveedores de servicios de activos virtuales.

Identification and Verification of Customers:

Risk-Based Approach: VASPs must implement a risk-based approach to CDD. This means applying enhanced due diligence (EDD) for higher-risk customers (e.g., Politically Exposed Persons - PEPs, customers from high-risk jurisdictions, complex corporate structures, high-value transactions, or unusual transaction patterns) and simplified due diligence (SDD) for lower-risk customers.

Ongoing Monitoring: Continuous scrutiny of transactions undertaken throughout the course of the relationship to ensure that they are consistent with the VASP's knowledge of the customer, their business, and risk profile, including, where necessary, the source of funds.

Report suspicious transactions (SARs) to the UIAF.

Conduct comprehensive customer due diligence (CDD), including identifying ultimate beneficial owners (UBOs) and politically exposed persons (PEPs).

UN Sanctions: As a member state of the United Nations, Colombia is legally obligated to implement sanctions imposed by the UN Security Council. UIAF Resolution 314/2021 directly references adherence to UN Security Council resolutions as a core component of ML/TF risk management. This includes asset freezes and other restrictions against listed individuals and entities.

E-money/Payment Tokens: Stablecoins are generally not classified as e-money or legal tender in Colombia, as they are not issued by the central bank and do not have the backing of the state. While they may function as a means of payment, they do not currently fall under specific e-money regulations unless they are issued by a regulated financial institution and meet specific criteria.

Securities: This is the most likely classification path if a stablecoin exhibits characteristics of a security, such as:

Circular Externa 027 de 2021 (SFC): This circular reiterates warnings about the risks of crypto assets and outlines the prohibition for supervised entities to participate in crypto activities, except within the framework of the regulatory sandbox. It doesn't explicitly classify stablecoins but emphasizes the general risk.

There is no specific "stablecoin issuer license" in Colombia.

The SFC's Regulatory Sandbox (La Gaceta), established by Circular Externa 027 of 2021, allows supervised entities to test innovative financial products, including those involving crypto assets, under controlled conditions and temporary authorizations. This allows for experimentation without full licensing in the initial stages.

Short-term Trading: If cryptocurrencies are acquired and sold within a short period (generally considered less than two years in Colombia for capital gains distinction), the profit is considered ordinary income. The profit is calculated as the selling price minus the acquisition cost.

Individuals: Subject to the progressive income tax rates in the Colombian Tax Statute (Articles 241, 330, and 336). These rates range from 0% to 39% depending on the taxable income bracket.

Businesses (Legal Entities): Generally subject to the corporate income tax rate, which is 35% (as of 2023-2024).

Applicability: Profits derived from the sale or exchange of cryptocurrencies that have been held for two years or more are considered occasional gains (capital gains).

Services Related to Cryptocurrency: Services provided by third parties related to cryptocurrency operations, such as exchange fees, platform commissions, or transaction fees charged by crypto platforms, are generally subject to the standard VAT rate of 19%. This is because these are services rendered for a fee.

Entity Targeted: OmegaPro Group (an international alleged Ponzi scheme), its local promoters, influencers, and related entities operating in Colombia (e.g., Bux Corp, Smart Business Corp). Violation Type: Unregistered and unauthorized financial intermediation, operating a multi-level marketing scheme that promised high returns without proper backing, misleading advertising, consumer fraud, and alleged pyramid scheme. Outcome: SIC ordered the cessation of all promotion and operations of OmegaPro-related schemes in Colombia, imposed significant fines, and mandated restitution to affected consumers. The Fiscalía has pursued criminal charges, leading to arrests of key promoters and the freezing of assets. Many victims have lost significant sums, and the full extent of recovery is uncertain.

Entity Targeted: Daily Cop S.A.S. and its founders/promoters (e.g., Camilo Andrés Suárez Aldana, David Mateo Suárez Aldana). Violation Type: Alleged pyramid scheme, unauthorized and illegal financial intermediation using cryptocurrencies as a front, offering unrealistic returns, consumer fraud. Outcome: SIC issued a definitive resolution ordering the immediate cessation of Daily Cop's activities, imposing fines, and requiring restitution. The Fiscalía subsequently arrested key figures behind the scheme and initiated criminal proceedings, uncovering millions of dollars in alleged fraud.

Entity Targeted: Local promoters and affiliates of the international Generación Zoe scheme operating in Colombia. Violation Type: Alleged illegal financial intermediation, fraud, and operating a Ponzi/pyramid scheme under the guise of coaching and crypto investments. Penalty Amount: Arrests and criminal charges against Colombian operators. Assets linked to the scheme were seized. Outcome: Colombian authorities, working with international counterparts, arrested individuals linked to Generación Zoe's operations in the country. Criminal proceedings are ongoing for charges related to aggravated fraud and illegal financial intermediation. Outcome: Provided valuable insights for future regulation, demonstrating a willingness by the SFC to study and understand crypto operations under controlled conditions.