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Colombia Declares Bitcoin Illegal, Peso is the Only "Valid" Currency

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The Superintendecia de Sociedades, a regulatory agency of the government of Colombia, has declared digital currencies including bitcoin illegal, stating only the Colombian Peso is permitted for transactions according to Panampost and El Tiempo, two South American-focused news outlets.

Francisco Reyes Villamizar, the head of the Superintendencia de Sociedades, described bitcoin as a fraudulent investment scheme, in which users convince other people to purchase the digital currency to increase the value of the coin.

Panampost revealed on December 27 Vilamizar’s controversial statement on Bitcoin, which stated that Bitcoin users invited more people to become part of the “investment club” to increase the profitability of bitcoin in less than two months.

Evidently, Villamizar failed to acknowledge the concept of Bitcoin. Bitcoin users are not convincing others to purchase bitcoin, but government regulations are. People are beginning to store their wealth in bitcoin to insulate themselves from impractical government regulations and monetary policies.

Severely Flawed Logic

The reasoning behind Villamizar’s negative stance on Bitcoin is that it is a fraudulent investment scheme because it is rapidly increasing in value.

Over the past 12 months, bitcoin has served the global population as a safe-haven asset and a global store of value, protecting the wealth of millions of people amid economic instability and financial chaos. Bitcoin’s decentralized nature enabled its user base to avoid excessive control from central authorities which demonstrates monopoly and total dominance over traditional monetary systems.

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The increasing profitability of bitcoin and its rising value is directly attributable to the market. There exists no central authority, agency or administrators which can control the digital currency. Its money supply is completely transparent, and all transactions are settled in a decentralized ecosystem wherein users have complete financial freedom.

Thus, by describing bitcoin as a fraudulent investment scheme, Villamizar is failing to acknowledge the vital role of cash and government-supported monetary system in supplementing actual fraud and corruption.

The value of cash and any other government-supported stores of value can be manipulated and altered by the government, as seen in recent events occurred in regions including Venezuela and India. The government has the power and authority to demonetize particular banknotes, create more fiat money at their demand and monopolize a country’s financial system.

Bitcoin Cannot be Regulated or Banned

Since its introduction in 2009, the cryptocurrency bitcoin has been declared illegal many times. Governments have imposed tight regulations. The value of bitcoin continues to grow.

That is because Bitcoin cannot be regulated or banned; it is a self-regulating system. Its decentralized nature allows users to send and receive transactions anywhere, anyplace at any given time. The public blockchain allows for any specific value to be settled, which cannot be regulated by any entity unless the decentralized network is shut down.

Andreas Antonopoulos, bitcoin and security expert, stated:

“The question is not whether bitcoin should be regulated, but whether it *can* be regulated. The reality is "No". The rest is nostalgia.”

Governments could attempt to regulate Bitcoin trading platforms, startups and service providers. However, Bitcoin itself cannot be regulated. The sheer fact that the Colombian government has thought of the idea of declaring bitcoin illegal is misconstrued.

As seen in ShapeShift’s termination of service in New York upon the introduction of BitLicense, if the Colombian government attempts to regulate money transmission startups and bitcoin trading platforms, companies will  leave the region. When that happens, people will continue to trade bitcoin on international bitcoin exchanges or a peer-to-peer basis.