The evaluations, which will take place in a sandbox, will last one year. The SFC will only accept pseudonymous cryptocurrencies such as Bitcoin and Ether.
A few days ago, the Financial Superintendency of Colombia (SFC) announced the characteristics of the tests on transactions related to cryptocurrencies between Bitcoin exchanges and local banks. One of the most striking aspects is that the standards of the Financial Action Task Force (FATF) will govern the evaluations.
In the next quarter, the Colombian regulatory entity will call for the pilot scheme, which will take place in a sandbox (regulated test environment). It will include the following aspects: application, selection, structuring, monitoring, and feedback, according to the SFC.
The fact of conforming to FATF regulations means that they will apply the highest standards to minimize the risk of money laundering and terrorist financing. In other words, these are the same measures that financial institutions with records of information and reports on suspicious transactions apply. The intention is to offer the best guarantees to users.
Given that the focus of the FATF is on auditing Bitcoin, it recently published a report listing a series of “suspicious” actions when making transactions with the first cryptocurrency on the market. Cryptocurrency users regularly perform many of the said actions.
Other prominent details regarding the tests are that they will last one year and only transactions with pseudonymous cryptocurrencies, such as Bitcoin or Ether, will undergo processing. The above suggests that transactions with privacy-oriented currencies such as Monero or Zcash will not be part of the tests, and may not have permission to trade in the country.
Requirements for Bitcoin Exchanges
Among the requirements for exchanges, they must only offer the purchase-sale service, a wallet for the storage of cryptocurrencies, and the option for only natural persons to participate.
The SFC will also implement a tool for the “Know Your Customer” (KYC) and “Know Your Transaction” (KYT) processes, as well as the authorization of an entity that this regulatory agency has supervised for operations with exchanges. No one knows yet the limits on the amounts for deposits and withdrawals.
Concerning the monitoring of transactions and identity certifications, the SFC mentions the services that companies Chainalysys, Elliptic, CipherTrace, IdentityMind, and Crystal provide.
During the tests, there must be reports on the progress of the process, while the SFC must send monthly reports to the Evaluation and Monitoring Committee (CES). The superintendency must also report the progress to an entity known as the “Cryptocurrency Table”.
The application cycle should tentatively close in November of this year, and the announcement of the entities that will participate will occur in December. The start of the pilot tests is scheduled for the first quarter of 2021.
In February, the creation of the regulatory sandbox that Colombia is advancing was causing uncertainty among cryptocurrency exchanges. The reason for that situation is that the SFC did not include exchanges in the tests with crypto assets.
Despite this picture, the Financial Superintendency recently announced that banks and exchanges will participate together in the pilot tests. With this, the SFC acknowledges the progress of cryptocurrency operations in the South American country.
By Alexander Salazar
