Latin America Is Falling Behind in Crypto Regulation

At a time when crypto, smart contracts, and decentralized applications are becoming established as part of the global financial system, Latin America has yet to define a clear and functional regulatory framework. This not only hinders innovation but also puts millions of users and investors in the region at risk.

To better understand the landscape, we spoke with Jazmín García, founder of Nohbek, a BAAS (Blockchain as a Service) platform specializing in Web 3.0 solutions and digital transformation. Recognized for her work as a regulatory expert, Jazmín warns: “In Latin America we comply out of obligation, not conviction; if there is no law, there are no good practices, which makes us remain reactive, not proactive.”

The Case of Europe: MiCA as a Model to Follow

In April 2020, the European Parliament approved the Markets in Crypto-Assets Regulation (MiCA), which came into effect in December 2024. It is the first comprehensive legislation regulating not only cryptocurrencies but also stablecoins, tokens, exchanges, and crypto-asset issuers.

MiCA requires service providers to register, comply with anti-money laundering rules, and submit detailed white papers. One of the most notable cases was Tether (USDT), which did not obtain a license and was removed from European exchanges.

MiCA marks a before and after. It is clear, operational, and provides legal certainty to all stakeholders. In Latin America, we are far from anything similar.

United States: Multiple Agencies but No Unified Framework

Unlike the European Union, the United States still lacks a single federal law that comprehensively regulates the crypto ecosystem. Instead, it has built a fragmented system where different agencies address specific aspects:

• The US Securities and Exchange Commission (SEC) regulates crypto assets it considers securities, as in the cases of Ripple and Binance.
• The Commodity Futures Trading Commission (CFTC) oversees assets linked to commodities.
• The Internal Revenue Service (IRS) treats crypto assets as property for tax purposes, requiring reporting of gains and losses.
• The Financial Crimes Enforcement Network (FinCEN) imposes KYC and AML standards on exchange platforms.
• Companies like Chainalysis support the government in detecting illicit operations through artificial intelligence.

Additionally, some states such as Wyoming have taken firmer steps, legally recognizing DAOs and promoting pro-crypto local legislation.

While this institutional framework allows some degree of functional regulation, the country still faces the challenge of harmonizing criteria among agencies and offering greater legal clarity for users, companies, and developers. The lack of a cohesive federal framework generates uncertainty, especially for those seeking to operate nationwide.

Latin America: Between Progress and Setbacks

Although the landscape in Latin America is diverse, partial or absent approaches predominate. Some examples:

• El Salvador recognized Bitcoin as legal tender in 2021. But without a robust educational campaign, adoption has been limited.
• Brazil passed a law in 2023 regulating financial technology service providers, including crypto.
• Argentina legally allows buying and selling cryptocurrencies, although without specific legislation.
• Peru and Colombia have bills under debate, not yet implemented.
• Bolivia prohibits the use of cryptocurrencies as a means of payment.
• Ecuador announced regulation in 2022 that has not yet come to light.

We are seeing isolated efforts. But without regional coordination, minimum standards, and political will, there is a risk of losing the race for technological leadership.

One of the key points highlighted by García is that governments still see blockchain only as synonymous with cryptocurrencies. But the technology has multiple applications such as traceability of agricultural and industrial products, decentralized digital identity systems, transparency in public procurement and social programs, automation of audits and legal processes, and digital rights and intellectual property management.

Blockchain is not the enemy. But in many governments, including Mexico’s, it is still associated with scams, speculation, or illicit money. That limited vision is leaving us out of the future.

Mexico: The Normative Divorce

Mexico was one of the first countries in Latin America to regulate fintechs with the 2018 Fintech Law. However, the framework has fallen short compared to the speed with which crypto-asset-based business models evolve.

The Fintech Law does not consider DeFi protocols, DAOs, or staking. The only accounting standard, NIF C-22, applies only if used as a means of payment. And fiscally, you can report income from crypto, but not deduct losses. It is a contradictory system.

This mismatch creates what she calls a “normative divorce” between accounting, tax, and financial laws, forcing companies to navigate a legal maze to operate.

The Risk of Not Regulating: Talent and Investment Drain

The lack of legal clarity not only affects users. It also drives away investments, discourages developers, and forces Latin American startups to migrate to jurisdictions such as Estonia, Portugal, or the United Arab Emirates, where regulation already contemplates decentralized scenarios. “Without clear rules, talent leaves. They don’t want to be in a country where operating could be considered illegal at any moment“, adds Jazmín.

According to the Crypto Ownership Report 2024 by Triple A, Latin America concentrates more than 55 million people who own crypto assets, placing it as one of the regions with the highest global adoption. Ignoring this reality not only exposes users but also leaves countries out of the competition for investment, talent, and technological development.

Beyond technical laws, the region needs several factors to enter the game:

1. Involve ecosystem players in legislative working groups.
2. Generate educational campaigns from governments.
3. Avoid prohibitive regulations and instead foster a flexible and pro-innovation framework.
4. Design comprehensive frameworks, not disconnected fiscal or accounting patches.

If Latin America wants to be part of the future of finance, it needs to stop reacting and start building. Because in the new decentralized financial order, regulation is not a barrier: it is a tool to unleash the potential of technology.