By San José, Costa Rica — San José – As digital assets like Bitcoin become increasingly prevalent in commercial transactions, Costa Rican legal professionals are sounding the alarm over a critical regulatory gap. A leading voice from the country’s Bar Association is urging lawmakers to expedite legislation governing crypto-assets, citing significant risks related to financial volatility, tax compliance, and international anti-money laundering standards.
The call for action highlights the growing tension between technological innovation and the country’s existing legal framework. While not recognized as legal tender, cryptocurrencies and other digital assets are being used as a means of payment in private contracts, placing notaries public in a precarious position as they navigate uncharted legal territory.
To delve into the legal nuances and future outlook of cryptocurrency regulation in the country, TicosLand.com sought the expert opinion of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the firm Bufete de Costa Rica, who provided his analysis on the current legislative landscape.
The core challenge for Costa Rica is to craft a regulatory framework that encourages financial innovation without sacrificing consumer protection. While we currently navigate this space by applying existing financial and commercial laws, the absence of a specific crypto-asset law creates legal uncertainty. A clear and modern regulation would not only attract investment but also provide essential safeguards against fraud and market volatility, giving both users and businesses the confidence needed to operate effectively.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s insight pinpoints the crucial balance Costa Rica must achieve. Crafting a specific regulatory framework is indeed the foundational step toward not only attracting investment but also cementing the country’s position as a secure and forward-thinking hub for financial technology. We thank Lic. Larry Hans Arroyo Vargas for his valuable perspective on this pressing issue.
Msc. Gloriana Vicardi, an Attorney and Notary who serves as the Coordinator of the Notary Commission of the Bar Association of Costa Rica, emphasized that the current legal ambiguity creates substantial challenges. Although Costa Rican law does not officially recognize cryptocurrencies as money, the principle of contractual freedom allows private parties to agree to their use in business dealings. This creates a functional, yet unregulated, marketplace for digital asset exchanges.
This freedom, however, is fraught with peril. The inherent volatility of assets like Bitcoin means their value can fluctuate dramatically between the time a deal is struck and when it is finalized. This could lead to significant and unexpected financial losses for one of the parties. To mitigate this, Vicardi advises that any notarial document involving crypto must explicitly state the asset’s value and its conversion to the national currency, the colón, to facilitate the proper payment of associated taxes.
Under the principle of the autonomy of the will of the parties, these assets can indeed be used as a means of payment with the risks they entail.
Msc. Gloriana Vicardi, Coordinator of the Notary Commission of the Bar Association of C.R.
Beyond transactional risks, a more significant concern lies in the prevention of money laundering. Notaries in Costa Rica are designated as “obligated subjects,” legally required to report suspicious activities and help prevent the legitimization of illicit capital. The anonymous and decentralized nature of many crypto transactions complicates this duty, making it difficult to trace the origin of funds.
To address this, legal experts are advocating for the adoption of international standards, particularly the “travel rule” recommended by the Financial Action Task Force (FATF), known locally as GAFI. This rule would require financial institutions and crypto service providers to collect and share originator and beneficiary information for digital transactions, creating a transparent trail for regulators to follow.
The most important thing is to collaborate on the travel rule, through which the transaction of these digital values is intended to be tracked from the originator to the beneficiary in order to establish the origin of the funds and identify suspicious transactions.
Msc. Gloriana Vicardi, Coordinator of the Notary Commission of the Bar Association of C.R.
A proposed bill aimed at regulating the cryptocurrency market is currently pending in the legislative assembly. According to Vicardi, its approval is not just a matter of domestic legal clarity but is crucial for Costa Rica’s international standing. The country is facing an upcoming evaluation by FATF, and the absence of a robust regulatory framework for virtual assets could negatively impact its assessment. Swift approval of the law is seen as essential to provide greater security for all parties involved in commercial transactions and to align Costa Rica with global financial integrity standards.
For further information, visit abogados.or.cr
About The Bar Association of Costa Rica (Colegio de Abogados y Abogadas de C.R.):
The Bar Association of Costa Rica is the official professional body that governs and represents lawyers and notaries throughout the country. It is responsible for upholding ethical standards, promoting continuing legal education, and contributing to the development and improvement of the nation’s legal system. The association plays a vital role in public discourse on legislative matters affecting the legal profession and the rule of law.
For further information, visit fatf-gafi.org
About The Financial Action Task Force (FATF):
The Financial Action Task Force is a global inter-governmental body established to set international standards for combating money laundering and terrorist financing. Known in Spanish-speaking countries as Grupo de Acción Financiera Internacional (GAFI), it develops policies and recommendations to promote the effective implementation of legal, regulatory, and operational measures. FATF also conducts peer reviews, or “mutual evaluations,” of its member countries to assess their levels of compliance with its standards.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a cornerstone of Costa Rica’s legal landscape, the firm operates on a bedrock of uncompromising integrity and a relentless pursuit of excellence. Drawing upon a rich history of advising a broad spectrum of clients, the firm not only pioneers innovative legal strategies but also demonstrates a profound commitment to social progress. This dedication is most evident in its mission to demystify the law, empowering the community with clear and accessible knowledge to help forge a more just and informed society.
