- The issuing institute recalled that bitcoin is not a legal tender in the country and pointed out that it is being used in criminal activities.
- Meanwhile, the BCP is focused on analyzing the development of its own digital currency that will serve as a complement to the cash fiat money.
The Central Bank of Paraguay (BCP) issued a statement this week in which it warns users of the financial system that bitcoin (BTC) and other cryptocurrencies are not legal and therefore do not have “any cancellation force.”
As has been happening in other Latin American countries, the Paraguayan government and the country’s regulatory bodies seek to prevent the use of cryptocurrencies from continuing to grow without state control.
The agency’s statement clarifies that cryptocurrencies are not legal tender and, therefore, do not have state support. As they are highly volatile assets, they constitute “high risk” investments, the institution stressed.
"The value of the cryptocurrency is based mainly on the trust that people give to it (users who decide to use and accept said currencies at their own risk)," says the text of the official statement.
"Its price fluctuates according to supply and demand, normally with a lot of variability, following high-risk investment parameters."
The central bank warned about the use that criminal gangs are making of private digital money. It said that crypto assets are being used as payment instruments in illegal operations, due to the anonymous nature of transactions when they are not regulated.
Crypto vs CBDC
The monetary entity indicates in its statement that the only valid currency in the national territory is the guarani, in accordance with the provisions of the Organic Law of the Central Bank of Paraguay.
“Consequently, bitcoin and other similar cryptocurrencies are not considered as bills or coins.” By not having “mandatory cancellation force in Paraguay” “therefore, they do not enjoy the guarantee of the State,” says the bank.
The BCP statement also highlights that the agency is analyzing the issuance of a central bank digital currency (CBDC), as other issuing agencies around the world are doing today.
In this sense, the bank reported on the approval of the regulations of the Working Group on Digital Currency of the Central Bank of Paraguay “in order to monitor the different initiatives at the international level on CBDC.”
On The Flipside
- The BCP is also analyzing the implications that “an eventual implementation of some type of CBDC” would have for the financial system of the South American country in the near future.
“The motivation to explore a CBDC is its use as a means of payment. A digital currency issued by the BCP could provide complementary money to the public, adhering to the development of the national payment system, as long as the security of the transactions is preserved”,
argues the bank.
The digital currency of the Central Bank of Paraguay “could be a secure means of payment in tune with a broader digitization of people’s daily lives, with the advantages of technology and without the risks associated with private cryptocurrencies,” it finally affirms the body in its statement.
Why You Should Care?
- In mid-July of this year, a bill to regulate the use of cryptocurrencies in Paraguay was presented in Congress with the aim of establishing legal, financial and fiscal security rules.