Home » Navigating the Risks of Investing in Bitcoin in Colombia: Precautions and Guidelines for New Investors

Navigating the Risks of Investing in Bitcoin in Colombia: Precautions and Guidelines for New Investors

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Navigating the Risks of Investing in Bitcoin in Colombia: Precautions and Guidelines for New Investors

After Bitcoin reached the valuation of $69,191 surpassing its previous record of $68,991 set on November 10, 2021, it is likely that many people increased their interest in investing in the cryptocurrency market, a market in which people arriving for the first time should exercise caution and minimize existing risks.

However, the Financial Superintendence, which would be the entity in charge of establishing the regulatory framework that will monitor and regulate digital assets in Colombia, has no obligations for now, since “this digital currency market is not part of the functions of the entity, since they are not a financial asset.”

Although experts point out that the entity in charge in cases of fraud or security problems is the Superintendence of Industry and Commerce, when contacted by El Tiempo about the step to be taken by investors in these cases, the entity did not provide a response about the process.

The risks of operations with digital currencies in Colombia include the fact that the purchase and sale of cryptoassets is not regulated or supervised, since the legal tender is the Colombian peso. The decision to invest or not in this type of asset corresponds to the freedom that people have over how they manage their money. Which leads experts to suggest that they make informed decisions, evaluating their ability to take risks.

Experts explain that people should avoid three similar characteristics that scams have with crypto assets. Nicolás Jaramillo, co-founder of Arch Finance, a company in charge of managing financial assets such as blockchain, crypto and Web3, highlights that it is necessary to be clear that the main risk is that of the market, but that does not only have to do with cryptocurrencies.

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“In the case of crypto assets it is a greater risk because it is more volatile than a bond or a term deposit or a stock, but the growth potential is also in its favor. The other risk is scams since as this is a newer and less regulated world and it works digitally, you have to know who the money is given to, what support it has behind it, what other countries it is in and under what regulations. You should not let yourself be pressured to make quick decisions and also be distrustful when they guarantee fixed profits,” he explained.

For the expert, it is clear that investors must think calmly about what risk they want to assume with their resources. “No one can offer you a fixed return because it is a market that changes, if people are not sure it is better that they ask questions and question the situations and even more so in the case of Colombia where there is still no regulation on these assets, because it does not allow surveillance. This does not prevent you from resorting to consumer protection measures if you have fallen into this situation,” he stressed.

In turn, Daniel Acosta, general manager of Binance for Colombia, Central America and the Caribbean, explained that although there is no specific regulation in Colombia, the company has more than 18 licenses in different countries, which gives investors an idea of the standards they have to protect users.

“It is very important that people take the responsibility of doing their research before trusting their money to a platform, person or entity. It is necessary that they do an Internet search on the website or the name of the project. If they notice something strange or irregular, the best thing you can do is block contact and cease all communications,” he advises.

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Acosta says that to stay safe from these scams, it is important to promote habits of investigation and caution, “it is essential that platform users adopt prevention practices that allow them to guarantee their financial security.”

Julián Colombo, director of public policies at Bitso for Latin America, points out that beyond the fact that local authorities are in charge of reacting to cases of fraud or security problems in investment platforms, whether to the Superintendency of Industry or another entity, from The crypto industry is working to strengthen the security, transparency, and trust of users and investors in the ecosystem.

Furthermore, for five years, companies like Buda have had a cryptocurrency taxation guide, which integrates the different concepts issued by the Dian and the technical advice of public accounting. They also have reporting channels, in order to give greater transparency to the market and give users the possibility of going to channels where they can manage any type of concern or inconvenience.

Regarding surveillance, there are regulatory principles regarding the prevention of Money Laundering and Financing of Terrorism, LAFT, in which the surveillance and control entities are the Superintendency of Companies, through the circular of December 24. of 2020, which obliges these companies to implement a LAFT management and prevention system.

“With the growth and adoption of the crypto ecosystem around the world, it is increasingly important to prioritize security. In this context, Binance actively combats threats in the ecosystem and in line with this commitment, we have a risk team “works to identify the most common crypto scam methods used by criminals in the world of cryptocurrencies, offering general guidelines on how to detect them and sharing best practices to avoid falling for them,” Acosta added.

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The rules that must be followed

Although companies that allow the exchange of cryptocurrencies do not have specific rules, currently, there are commercial, tax, and reporting obligations for crypto service providers, in part, these rules and their compliance are derived from the pilot carried out by the Financial Superintendency in a regulatory sandbox and what they demanded from the platforms that are in charge of exchanges such as Binance, Coinbase, or Bitso.

In this way, a record is kept, and transactions exceeding $150 or suspicious operations in general must be reported to the Financial Information and Analysis Unit (UIAF).

Furthermore, although there have been parliamentary initiatives to regulate the activity that seeks to protect users of cryptoassets, they have not come to fruition. In fact, last semester the project to regulate them reached three out of four debates and did not prosper in the Senate plenary session.

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