Venezuelan legislation has been a point of study within the world of cryptomonedas as it is one of the most complete regarding the regulation of these assets. The last normative body decreed, the Constituent Decree on the Integral System of Cryptoactives, promulgated on January 30, 2019, proposes some changes that could be drastic within the Venezuelan market.
Understanding the importance of this market for the world trade of crypto coins, it is imperative to analyze this law in order to evaluate its true scope for Exchange Houses (Exchanges), ICOs and other companies that make operations with crypto coins within Venezuela.
- 1 Application of the Decree on the Integral System of Cryptoactives in Venezuela
- 2 Application of the Decree on the Integral System of Cryptoactives for Exchanges
- 3 Compulsory registration system
- 4 How can the Decree on the Integral System of Cryptoactives in Venezuela affect the market?
- 5 Situation of the ICOs in the Decree on the Integral System of Cryptoactives in Venezuela
Application of the Decree on the Integral System of Cryptoactives in Venezuela
Article 1 of the Decree establishes that the objective of the legal body is “to create and define the regulatory framework applicable to the Integral Cryptoactive System” within Venezuelan territory. In order to understand what the legislator refers to when he mentions the “Integral System of Cryptoactives”, we must refer to article 6 of the Decree, which mentions that it is made up of the legal norms that regulate the incorporation of cryptoactives within Venezuela.
According to article 2, the application of this Decree is established as “public order” within the Venezuelan jurisdiction, which means that its application prevails over the rest of the laws that may be applied within the national territory.
The application of this Decree will be seen in article 3 and there we are told that it will apply to “goods, services, securities or activities” that are related to the “constitution, issuance, organization, operation and use of cryptoactives” as well as to the “purchase, sale, use, distribution and exchange of any product or service derived from them and other related activities.
When reading article 3 we can see that the Decree on the Integral System of Cryptoactives has a wide field of application since it applies to all persons or companies that buy and sell cryptomonedas as well as to exchanges and ICOs that decide to establish themselves within the Venezuelan territory or that make operations within said space.
Application of the Decree on the Integral System of Cryptoactives for Exchanges
Particularly for the Exchanges two articles have been dedicated within the Decree. Article 27 mentions that the Houses of Exchange will be part of the Integral System that we have mentioned previously.
However, what is truly important for Exchanges can be seen in article 28 of the Decree when it mentions that the functions of the Exchange Houses will be limited to what is determined by their “Operating License” granted by the “National Superintendence of Cryptoactives and Related Activities”.
The functions that will be determined in the license will be with respect to the pairs of changes that will operate, the crypto currencies and Fiat currencies that will be listed and the users that will be able to operate within the Exchange. This last point is important to mention since it means that a state figure, in this case the Venezuelan one, will be able to limit the operations of a specific person within the crypto-money market. In addition, it implies that the state would supervise, in a certain way, who are the people who operate in crypto currencies within the country.
Compulsory registration system
The Decree on the Integral System of Cryptoactives establishes a mandatory registration system governed by the Superintendency for those engaged in the mining of crypto coins, Exchanges and for all persons or companies that provide any type of service or are suppliers of goods that are related to the scope of application of the Decree established in Article 3.
In addition to its mandatory nature, article 33 of the Decree establishes that this registration carried out by the Superintendency will have a cost, which has not yet been established. It also establishes a cost for the acquisition of the license that authorizes the functions of the Exchanges within the Venezuelan national territory.
According to article 34 of the Decree, the Superintendency shall have the power, together with Venezuelan public agencies, to supervise compliance with the mandatory register as well as to evaluate compliance with the functions of the Exchanges and miners registered within the system.
In the event that companies or persons are obtained executing the actions regulated by this Decree without the due authorization of the Superintendency, the latter shall be empowered to take preventive measures against these subjects.
These measures may include the seizure of mining equipment, suspension of operating licenses of the Exchanges or any other Venezuelan law established. This could include criminal, civil or administrative sanctions against the persons involved in the sanctioned act.
Likewise, based on article 42 of the Decree, the violators of the norm must pay between “100 to 300 sovereign cryptoactives”. Based on the value of 60 dollars for each “Petro”, the only crypto currency issued by the State of Venezuela, the sanction would be between 6000 and 18000 American dollars. These penalties shall be paid at Petros or at any other type of cryptomontage determined by the Superintendency.
How can the Decree on the Integral System of Cryptoactives in Venezuela affect the market?
Until the publication of the respective Decree, the mining of criptomoney in Venezuela had remained without any type of legal regulation, a situation that produced certain inconveniences due to seizures of equipment in confusing processes and harassment by authorities of those linked. With the publication of this regulation, the legal status of the action is clarified.
While it is true that the norm only provides a mandatory digital registry of crypto-miners and the payment of a license to do the respective mining action legally, the regulation also explains throughout its Chapter IV which is the procedure to follow when some kind of problem occurs.
The crux of the matter is that it is not known how much the miners will have to pay to obtain their licenses and be able to operate in Venezuela legally and safely. In the event that licensing is very expensive, the global mining market could be affected because Venezuela is the cheapest country in the world to mine and has an important network of miners distributed throughout the country.
Situation of the ICOs in the Decree on the Integral System of Cryptoactives in Venezuela
Initial Coin Offering or ICO are not directly mentioned in the new Venezuelan legal body, but they are indirectly mentioned when they mention in their article 3 that the application of the law extends to the “emission of cryptoactives”.
As they are regulated by law, ICOs will have to go through the mandatory Registration System established in Articles 29 and 30. This also means that ICOs will have to make a payment in order to register, although it is not yet known how much this will be.
However, among the failures to regulate this issue, the Decree on the Comprehensive Cryptoactive System in Venezuela does not mention whether the Superintendency will make any kind of review of registered projects. The revisions could range from financial to technical aspects that could be specific to the project.
Nor is there any pronunciation regarding any type of protection for investors who might participate in possible ICOs issued in Venezuela. Since it is not possible to apply the securities laws of the shares because this is a rule of public order and with immediate application, this element is important to detail so that there is legal certainty for investors.
These two points are pending tasks to be taken into account in order to be regulated by means of Administrative Rulings promulgated by the Superintendency itself.