• The issuing bank reminded the nation that bitcoin was not legal tender and said that criminal activity is using it.
• The BCP continues to analyze the possibility of developing a digital currency as an addition to 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 official statement states that “The cryptocurrency’s value is determined mainly by the trust people place in it (users who choose to accept or use said currencies at their own risk).”
Add:

“Its value fluctuates depending on supply and demand. This is normal, but with significant variability. Its high-risk investment parameters are also important.”
It warned of the criminal gangs’ use of digital money. Due to their anonymity, crypto assets can be used in illegal transactions.

Crypto and CBDC

According to the Organic Law of Central Bank of Paraguay, the statement of the monetary entity states that the guarani is the sole valid currency on the territory.

“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.

BCP also states that it is currently analyzing the issue of central bank digital currencies (CBDC) as well as the other worldwide issuing authorities.

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.”

To 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”,
The bank disagrees.

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

• A bill was introduced in Congress in mid-July to regulate cryptocurrency use in Paraguay. It had the goal of creating legal, financial, and fiscal security regulations.

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