Felipe Vallejo, Chief Regulatory and Corporate Affairs Officer
The guide we use to self-regulate our operations according to leading industry standards.
Recent crypto industry events, preceded by growing global cryptocurrency adoption, have accelerated governments’ interest in regulating crypto service providers. Since our inception in 2014, Bitso has supported regulatory entities as they seek to create clarity for the industry. We’ve done so with the conviction that accountability, transparency, and risk management are a precondition for clients’ protection, and that regulatory clarity is necessary for market integrity.
Today, we’re the leading financial services company powered by cryptocurrencies in Latin America. Our brand is present in Argentina, Brazil, Colombia, and Mexico, offering a simple and reliable way for customers to benefit from borderless, secure, and easy-to-use financial products powered by crypto. From financial exclusion to expensive cross-border payments and rapidly depreciating fiat currencies, Latin America’s financial system is full of untapped opportunities for improvement. At Bitso, we’re leveraging crypto to address these flaws. In the first three quarters of 2022 we transacted more than $2.1 million in cross-border payments using crypto quickly and inexpensively, and we’re working to increase that number in 2023.
Despite crypto’s many real-world use cases, its potential rests on its ability to become the trustworthy alternative to traditional banks, and regulation plays a key role in creating the trust needed to accelerate adoption. Over the past 8 years, Bitso has consistently sought to comply with existing regulations and even self-regulate wherever regulation has been lacking.
Our experience as one of the few end-to-end regulated companies in the region has helped us identify best practices that apply to LatAm’s financial reality. What follows are practices and principles we’ve committed to as a financial services company powered by crypto that prioritizes safety, accountability, and risk-management. These are the guidelines that govern our operations and the standards we keep in mind when we collaborate with regulators to build frameworks for the future of finance.
Bitso’s Guiding Principles for Crypto Regulation
1. Upholding our clients’ interests above all else. As we strive to create products that make crypto useful, we are committed to operating in a safe, secure, and transparent manner. Consumer protection has always been at the core of our business, and in the past we’ve prioritized this over accelerating our growth. Our bet has paid off (read more about that here).
2. Secure custody of funds. We support public policies that require strong custodial practices for companies that hold customers’ assets. We believe separation of funds, multi-signature wallets, and constant audits from independent parties are key to protecting against potential risks. We take necessary precautions to protect customer assets from unexpected eventualities, and would not use customer funds without their explicit permission.
3. A truly inclusive financial system. International financial regulation has been built by and for the privileged, we want it to be built for everyone. A significant proportion of the Latin American population does not have credit scores or appropriate identification. As a result, many have been excluded from the financial system, thus unable to access equitable financial products and services. We advocate for regulations, policies and practices that prioritize the interests of those who have been left behind by the traditional financial system.
4. Technology neutrality. Technologies are not inherently good or bad, and users have the right to use any technology—including blockchain—to serve their needs. We support regulation that focuses on the objectives to be achieved rather than the technology used to achieve them.
5. Anti-Money Laundering rules that actually prevent crime. While we work closely with the Financial Action Task Force (FATF) and maintain compliance with the AML/CFT standards they’ve developed, we see many AML policies which require disproportionate customer due diligence procedures as restrictive to financial services providers serving lower income people. We therefore support the logical application of KYC/AML policies that identify risks based on countries, customers and products; and that do not compromise financial technology institution’s ability to provide financial services to a broader range of people. Given the transparent nature of blockchain technology, crypto is especially well-suited to provide information for appropriate risk-taking with regards to illicit activity. This is compounded by the generally low percentage that illicit activity represents out of all cryptocurrency activity: in 2022 only 0.24% of all cryptocurrency activity was associated with illicit activity.
6. Education as a driver of informed risk-taking. In emerging markets, access to sophisticated financial instruments has been limited to a select group for too long. A lack of financial education and use of complicated, alienating jargon have contributed to a culture where people refrain from using instruments that can create generational wealth-building opportunities. We advocate for financial education and support policies that require clear and fair communication and proper risk disclosures that empower customers and the general public to make sound financial decisions.
7. Corporate governance arrangements that foster ethical business practices. Few responsibilities are as great as holding other people’s money. We thus value and advocate for the implementation of internal controls and processes that uphold the integrity of operations and make our Directors accountable to pursuing customers’ best interests. We support policies that require board oversight for fundamental decision making and that ensure all stakeholder interests are duly protected.
Through each of our guiding principles, Bitso supports the creation of regulatory frameworks for the industry that drive trust and transparency. As regulation for the industry is created, we encourage companies to adopt supplementary self-regulatory practices to support market integrity. Building a foundation for our services based on accountability is key to push mainstream adoption, advance the industry, enable a fairer monetary system, and continue to empower the region with universal access to the digital economy of the future.