Bolivia's Crypto Ban: Exploring The Country's Strict Stance

Bolivia is one of the few countries that has banned cryptocurrency. The Bolivian Central Bank issued a resolution in 2014, barring the banking sector from any transactions related to crypto assets. The bank stated that cryptoassets are not legal tender and warned of the potential financial losses and scams that users of these digital securities could face. Bolivia's stance on cryptocurrency is driven by concerns about financial stability, money laundering, and other financial crimes. Despite the ban, blockchain advocates in the country are pushing for a change in the government's position.

Bolivia's central bank banned crypto to protect its population from scams and fraud

Bolivia has banned the use of cryptocurrency in the country, with the Banco Central de Bolivia (BCB) issuing a "prohibition" on crypto and warning about the "risks" involved in investing in crypto assets. The BCB stated that crypto assets are not legal tender in Bolivia and prohibited their use, commercialisation, and purchase, citing potential risks of economic losses and scams for their users and holders.

The Bolivian central bank's decision to ban crypto is aimed at protecting its population from these risks. In its press release, the central bank emphasised the need to safeguard the public from "risks, frauds and swindles" associated with crypto trading. The bank also addressed the unregulated nature of cryptocurrencies, stating that they are not issued or controlled by a central authority, which can lead to financial losses for individuals.

The BCB's stance on crypto is not new. In 2014, the bank issued a circular prohibiting virtual currencies and flagged funds received through crypto exchanges. Additionally, in 2017, Bolivian authorities arrested 60 individuals allegedly involved in training related to investing in cryptocurrencies. The country's financial authority, ASFI, reminded citizens that such activities are prohibited to prevent them from losing their money to scams.

Bolivia's ban on crypto also extends to the banking sector. The central bank barred banks from any transactions related to crypto assets, including their use, marketing, or transactions within the national payments system. This move further reinforces the country's commitment to protecting its citizens from the risks associated with crypto.

While the Bolivian government has taken a hard line on crypto, there is still a community of blockchain advocates in the country. These individuals are working to educate both the people and the government about the broader applications of blockchain technology. Despite the ban, crypto enthusiasts have formed underground networks, trading in cash to remain invisible to the government.

Crypto is not a legal tender in Bolivia

Cryptocurrency is not a legal tender in Bolivia. The South American country has essentially banned cryptocurrency, prohibiting the use of any currency not issued or controlled by its monetary authority. The Bolivian Central Bank (BCB) has issued a "prohibition" on crypto in the country, warning that users of these digital securities could be in line to experience financial losses or fall victim to scams. The BCB has stated that crypto assets are not legal tender and are not regulated, therefore, people who use them are exposed to potential risks and losses.

The BCB's stance on crypto is driven by concerns about financial stability and the stability of the national currency, the boliviano. The central bank has barred the banking sector from any transactions related to crypto assets, prohibiting their use, marketing, and transactions in the national payments system. This measure was implemented to protect the public from risks, fraud, and economic losses associated with crypto trading.

Bolivia's ban on cryptocurrency is specific to commercial transactions using a currency not issued by the central bank. Individuals are not allowed to use cryptocurrencies like Bitcoin to pay for goods and services. However, the ban does not prohibit owning or trading crypto on exchanges, but it does prevent banks from transacting with them.

Despite the ban, blockchain advocates and crypto enthusiasts in Bolivia are pushing back. They argue that blockchain technology offers broader applications beyond cryptocurrency, such as transparency and an alternative to traditional banking. Additionally, they highlight the high unbanked population in Bolivia, which could benefit from crypto and blockchain-based solutions.

While Bolivia has taken a hardline stance against cryptocurrency, it is important to note that the country's blockchain community is growing. Crypto advocates are determined to change the government's position and educate both the people and the government about the potential benefits of blockchain technology.

Crypto is prohibited in Bolivia because it is not issued by the monetary authority

Crypto is prohibited in Bolivia, and has been since 2014. The Bolivian Central Bank issued a resolution banning not only Bitcoin but also any other currency not regulated by a country or economic zone. The Central Bank of Bolivia has barred the banking sector from any transactions related to crypto assets.

The Banco Central de Bolivia (BCB) has issued a "prohibition" on crypto in the country and "warned that users of these digital securities" could be in line to experience financial losses or fall victim to "scams" – as they are "not trustworthy" in nature. The bank has also stated that cryptoassets are not a legal tender in Bolivia and so has prohibited their use, commercialisation, and purchase.

The BCB has not attempted to criminalise holding or trading crypto, but it does not want businesses and brokers to provide crypto-related services in Bolivia. The bank has said that:

> "Private initiatives related to the use and commercialisation of [...] cryptoassets may not be operated through the Bolivian financial system. They do not operate with the authorization of the BCB or the [regulatory] Financial System Supervision Authority."

The BCB has also warned about the dangers of investing in crypto projects, stating that its "ban" would "protect against risk, fraud, and scams" that ordinary Bolivians might otherwise be exposed to.

Bolivia's socialist government may put crypto enthusiasts in a difficult position

Bolivia is one of the few countries that has banned cryptocurrency. In 2014, the Banco Central de Bolivia (BCB) issued a circular prohibiting the use of virtual currencies by banks and in commercial transactions or payments. This was due to concerns about the potential risks of economic losses, fraud, scams, and criminal activities associated with cryptocurrencies.

The return of the socialist government, led by Luis Arce, has put crypto enthusiasts in Bolivia in a difficult position. Despite the ban, blockchain advocates and crypto enthusiasts have continued to push for the adoption of cryptocurrencies and blockchain technology. They argue that blockchain-based banking and cryptocurrencies can offer a viable alternative to traditional financial services in a country with a high unbanked population and a large informal economy.

The current government, however, is unlikely to reverse the crypto ban. Senior economist and emeritus professor at Universidad Mayor de San Andrés (UMSA) in Bolivia, Alberto Bonadona, stated that "all these kinds of cryptocurrencies are not quite welcome in Bolivia." The government and most Bolivians still view cryptocurrencies, such as Bitcoin, as speculative instruments rather than a reserve or currency for international transactions.

Bolivia's blockchain activists are working to educate both the people and the government about the broader applications of blockchain technology. They aim to communicate the potential benefits of blockchain and cryptocurrency adoption, such as increased transparency and financial inclusion. Despite the challenges posed by the socialist government's stance on crypto, advocates remain persistent and hopeful for a change in policy.

While the use of virtual currencies is prohibited in Bolivia, the country has a growing community of crypto enthusiasts and blockchain advocates who are determined to change the government's position. The return of the socialist government has created a challenging environment for them, but they remain committed to promoting the benefits of blockchain technology and cryptocurrency adoption.

Crypto advocates are pushing back against the ban

Crypto advocates are pushing back against Bolivia's ban on cryptocurrency. Bolivian blockchain engineer Mario Blacutt, for instance, has been an outspoken critic of the ban. In 2020, Blacutt had his bank accounts shut down and his credit card taken away due to a directive by the country's central bank prohibiting virtual currencies. However, with the fall of the left-wing government that had imposed the ban, Blacutt felt safer revealing his identity and speaking out.

A growing community of advocates, including Bolivian software engineers, entrepreneurs, and developers, are also working to change the government's stance on crypto. Despite the ban, the blockchain community in Bolivia has been expanding. For instance, the peer-to-peer exchange platform Paxful saw a 570% increase in trading volume and a 230% increase in new user registrations in 2020 compared to 2019. LocalBitcoins also experienced over 450% growth in trading volumes between January and September 2020, reaching a daily high of $17,000 on September 2.

Bolivia's blockchain activists are focused on educating both the people and the government about the broader applications of blockchain technology. Gabriela Melendrez, a Bolivian software engineer, founded Bolivian Mind Blockchain, a platform for learning and sharing knowledge about blockchain technology. She has also interviewed personnel from the Central Bank of Bolivia to understand the motivations behind the ban, which, according to Melendrez, was implemented to protect the population from pyramid schemes, Ponzi schemes, and other fraudulent activities.

Blockchain developer Huascar Miranda Martinez noted that the bank prohibition is not a significant obstacle for crypto enthusiasts, who have formed underground networks that trade in cash, making themselves invisible to the government. Martinez also highlighted that people mostly trade bitcoin in person to avoid interactions with banks, agreeing on prices via WhatsApp groups or other social media platforms before meeting at restaurants or cafes to exchange bitcoin wallet addresses for cash.

While the Bolivian government has cited concerns about scams and the use of cryptocurrencies for criminal activities, crypto advocates argue that blockchain technology offers a viable alternative to traditional financial services in a country with a large unbanked population. According to World Bank statistics, in 2017, 46% of Bolivian adults did not have a bank account, and only 7% had a credit card. Advocates believe that blockchain-based banking and cryptocurrencies can address this financial inclusion issue.

Despite the pushback from crypto advocates, the current Bolivian government has shown little indication of reversing the ban. Alberto Bonadona, a senior economist and emeritus professor at Universidad Mayor de San Andrés (UMSA), stated that cryptocurrencies are not welcomed in Bolivia, and they are still viewed with skepticism by many. The government and most Bolivians see bitcoin as a speculative instrument rather than a reserve or currency for international transactions.

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