Cryptocurrencies in Colombia: Key Resolution on Smart Contracts and Crypto Assets in 2023
On July 17, 2023, the Superintendency of Companies in Colombia, in its Office Communication 220-139607, issued a pivotal resolution addressing the possibility of creating simplified joint-stock companies (SAS) through smart contracts. This consultation also delves into matters concerning crypto assets and shares, which are of significant relevance to investors operating or planning to operate with such assets in Colombia.
In the aforementioned communication, the Superintendency of Companies reaffirms its doctrinal stance on contributions to commercial companies using crypto assets. This represents a significant shift from their previous position, as expressed in Office Communication 220-196196 dated September 30, 2020.
This change in stance is attributed to the influence of the pronouncement by the International Accounting Standards Board – ISBD (International Accounting Standards Board), which led the Superintendency of Companies to consider cryptocurrencies as now aligned with international accounting standards.
According to the Superintendency of Companies’ interpretation, contributions made to companies with crypto assets are allowed in Colombia, provided certain criteria are met, such as:
- Complying with inventory recognition criteria or as an intangible asset in accordance with current regulations and making a comprehensive disclosure of the economic event in accordance with legal provisions.
- Adhering to the legal regulations governing in-kind contributions, such as Articles 122 and subsequent provisions of the Commercial Code and other applicable rules.
- Obtaining the approval of associates regarding the valuation of crypto assets, from which point they will be jointly responsible for the assigned value.
This resolution marks a significant milestone at the intersection of cryptocurrencies and business practices in Colombia and holds substantial implications for investors and companies operating in this ever-evolving space.
Recognition of Cryptocurrencies in Companies According to Current Regulations
How are cryptocurrencies recognized in companies in line with current regulations? This question is of vital importance for businesses and investors. The categorization of cryptocurrencies as “intangible assets” has a direct impact on their accounting treatment, and this may vary depending on their intended use. Here, we examine how cryptocurrencies are recognized in the context of companies, following the guidelines of current regulations.
Cryptocurrencies, when considered “intangible assets,” can be treated as inventory if held with the intent of being sold in the ordinary course of business, in accordance with the International Accounting Standard (IAS) 2. This means that if a company holds cryptocurrencies with the purpose of selling them, the rules of IAS 2 apply.
However, in situations where IAS 2 is not applicable, for example, when cryptocurrencies are considered assets not intended for sale and are reflected on the company’s balance sheet, the provisions of IAS 38 come into play. IAS 38 addresses the accounting treatment of intangible assets that are not inventory and provides specific guidelines on how to value and account for these assets.
In summary, the accounting treatment of cryptocurrencies in companies depends on their intended use, whether for sale or as intangible assets not intended for sale. These decisions must comply with current international regulations and are governed by IAS 2 and IAS 38.
Legality of Commercial Operations and Commercial Acts with Cryptocurrencies in Colombia
When it comes to the legality of conducting commercial operations or commercial acts using cryptocurrencies, crypto assets, or virtual currencies like Bitcoin in Colombia, it is essential to understand the guidelines provided by the Superintendency of Companies. These guidelines outline the paths that companies can follow to ensure legal compliance in an ever-evolving environment.
According to the Superintendency of Companies, the legality of such operations must be in line with the determinations of the judicial authorities, which have the authority to judge the legality or illegality of conduct. In this sense, it is important for companies to submit to the authority of these instances and comply with the decisions they make in cases related to cryptocurrencies and commercial transactions.
However, it is essential to note that companies have the flexibility to engage in any type of activity not prohibited by the law and within their corporate purpose. This opens up opportunities for the adoption of cryptocurrencies in a variety of commercial contexts.
Additionally, the responsibility of company administrators in carrying out thorough “due diligence” in operations involving cryptocurrencies is emphasized. This is essential to prevent illicit activities, such as money laundering, terrorist financing, and other illegal practices that may be associated with the use of cryptocurrencies.
In summary, the Superintendency of Companies points out that the legality of commercial operations with cryptocurrencies is subject to the decisions of the judicial authorities, but companies have leeway to develop activities within the limits of their corporate purpose. Furthermore, it is crucial for administrators to conduct thorough due diligence to ensure legal compliance and prevent illicit activities in the use of cryptocurrencies.
Formation of SAS Companies in Colombia through Smart Contracts
The possibility of establishing an SAS company through Smart Contracts in Colombia is a topic of growing interest. However, it is crucial to understand the legal and regulatory implications. The Superintendency of Companies provides essential clarifications on this matter.
What Are Smart Contracts?
First and foremost, it is important to define what “Smart Contracts” are. The Superintendency of Companies describes them as intelligent digital contracts based on blockchain technology, comprised of rules and conditions that, when fulfilled, automatically trigger predefined actions in the contract.
Despite technological advancements, the current regulations in Colombia and, in particular, Law 1258 of 2008, along with existing legal doctrine to date, establish that it is not possible to establish a Simplified Joint-Stock Company through Smart Contracts. This is due to the impossibility of meeting the legal requirement to submit the company’s incorporation document, either notarized or personally presented to the Chamber of Commerce in the location where the company has established its principal domicile.
In summary, current Colombian regulations and existing legal doctrine do not permit the formation of a Simplified Joint-Stock Company through Smart Contracts, as it is not possible to meet the legal requirements for commercial registration. It is essential to understand the legal limitations in this context before considering this option.
Feel free to contact us for personalized advice and answers to your questions about maximizing opportunities in the world of cryptocurrencies in Colombia.