Regulation of Cryptocurrencies and Blockchain in the Dominican Republic: Caution and Challenges  

The Dominican authorities have taken a cautious and not very receptive approach to the emerging market represented by cryptocurrencies and blockchain technology, however, given the risks posed by the non-regulation of these assets, it is expected that in the not too distant future a legal framework will be established at the national level to provide legal certainty to users and to allow the sustainable and responsible development of cryptocurrencies

In recent years, cryptocurrencies and blockchain technology have revolutionized the international financial landscape, providing new opportunities for financial inclusion and transaction efficiency. As these digital assets and new technologies gain popularity and become integrated into the global economy, countries around the world have been challenged to establish policies and regulatory frameworks that address the risks and opportunities associated with these new figures. 

The rise of these technologies has generated a disruption in the markets, and the Dominican Republic has not been oblivious to this trend. However, to date, Dominican authorities have shown no interest in planning the issuance of a state cryptocurrency or implementing specific legislation to regulate private cryptocurrencies in a comprehensive manner, despite the fact that these already circulate freely in the country. 

Data published by Diario Libre based on studies conducted by MasterCard, show that by mid 2022, the use of cryptocurrencies had increased by 52% in the Dominican Republic compared to the previous year, for which it is additionally exposed, that 54% of Dominican consumers would be interested in educational workshops on cryptocurrencies at the national level, in order to obtain better knowledge about them and present them as a secure payment method. 

Despite such data, a few months before its publication, on September 30, 2021, the Central Bank of the Dominican Republic referred to the matter and made a publication through which it warns the national population that no type of cryptocurrency is backed or authorized by the Monetary Board for its issuance and use as a method of payment, that is to say, that they are not legal tender and do not have the force of discharge of obligations throughout the national territory.

Based on this statement, it can be understood that the Central Bank merely made a warning when indicating that crypto-assets do not have the backing of the Monetary Board, since it does not make reference to their complete prohibition among market participants. In this sense, the lack of comprehensive legislation has left legal loopholes that could generate uncertainty for all users operating in this ecosystem.

The decentralized and pseudonymous nature of cryptocurrencies can lead to scams and illegal activities, so it is essential to establish mechanisms that protect users from possible abuses and frauds. In addition, it is important to mention that regulation should primarily address the issue of tax evasion and money laundering, two frequent concerns related to the use of cryptocurrencies.

Establishing clear guidelines on the declaration and taxation of profits generated by cryptoassets, as well as implementing effective measures to prevent the misuse of these currencies in illegal activities, becomes a fundamental task to guarantee the integrity of the Dominican financial system. 

The promotion of financial and technological education is also a key component for effective regulation. It is necessary to promote the understanding of cryptocurrencies and blockchain technology among the Dominican population, so that citizens can make informed and responsible decisions regarding their use. Likewise, the training of professionals specialized in these technologies should be encouraged, which will contribute to the development of local talent and the promotion of innovation in the country.

There is evidence of countries that already have or are planning to issue their own digital currency, such as El Salvador, Uruguay, Peru, the Bahamas, South Africa and Brazil, among many others. It is more than evident that cryptocurrencies have a promising future and that in a few years they will be part of the regulated economic and financial system worldwide. The presence and circulation of cryptoassets and blockchain technology is a fact and it is only a matter of time before other more conservative countries such as the Dominican Republic enter fully into the matter.

In conclusion, the regulation of cryptocurrencies in the Dominican Republic still faces important challenges to establish a solid and complete legal framework. It is necessary to find a balance between consumer protection and the promotion of innovation, always seeking to promote the sustainable and responsible development of this emerging market. Collaboration between the government, financial entities and the crypto community will be key to build a regulation that promotes trust and progress in this new financial era for the benefit of the Dominican economy and its citizens.

Autora: Melissa Santiago Ortega

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