The first Bitcoin exchange in Chile, where citizens can buy bitcoin with pesos, launched this month with $40,000 in funding from a surprising donor: the Chilean government.
SurBTC represents a huge step forward for cryptocurrency in Chile. It's not just because the exchange exists at all, but because the government has essentially given the exchange its blessing by committing money as well as regulation and oversight in the form of financial audits and anti-money laundering regulation.
"The Chilean government appears to be open to supporting this technology and by agreeing to fund this startup has taken a different policy approach than many countries who have given digital currencies a cool reception," said Matthew Burgoyne, a Canadian lawyer who specializes in Bitcoin. "I'm about 99 percent sure the Canadian government has never provided financial support to any type of Bitcoin organization."
While the UK and the US are edging closer to regulating Bitcoin exchanges in a similar fashion, Bitcoin still exists in a legal interzone as new uses are continually approved and policed on a case-by-case basis, like for political funding.
SurBTC's funding came from the Production Development Corporation (CORFO), a business incubator under Chile's Ministry of Economy, Development, and Tourism, SurBTC founder Guillermo Torrealba said. Use of the funding will be audited by the government, and SurBTC will be overseen by the Chilean Financial Intelligence Unit, an anti-money laundering department similar to the US's Financial Crimes Enforcement Network.
"Bitcoin is an incredible solution for many financial troubles in all of South America, like expensive remittance or lack of banking infrastructure," Torrealba said. According to him, the money given by the government will be used for "everything besides buying infrastructure" and he hopes that SurBTC's funding success will inspire other Bitcoin entrepreneurs in Chile.
SurBTC is just the latest example of Bitcoin gaining a serious foothold in Latin America. Neighboring Argentina is seen as a hub of Bitcoin activity. As of 2014, Buenos Aires had roughly six Bitcoin-accepting sites for every million inhabitants, according to CoinDesk. In contrast, New York City had around four. This week, Taringa!, an Argentinian social network, announced plans to dole out Bitcoin to top contributors because the country's financial infrastructure like banks and credit services aren't sufficiently widespread to be practical.
That Bitcoin could be used to stabilize struggling economies is an idea that has long been vaunted by cryptocurrency advocates. But despite the Chilean government coming out strong for Bitcoin, SurBTC is just one exchange. Much work needs to be done for Bitcoin to really take off in the country.
"For Bitcoin to succeed in Chile the companies pushing it have to educate the banking sector first and do things in a very professional way," Torrealba said. "Being in a grey area doesn't mean 'time for party.' This is exactly how reputations are destroyed."