Cryptocurrency development advances in Costa Rica with little regulation and many gray areas

Reading Time: 6 minutes ;  Published: 6 months ago on July 25, 2021

More and more merchants are beginning to adopt cryptocurrencies such as bitcoin as a method of payment.

The Costa Rican market advances at a rapid pace.

The cryptocurrency market in Costa Rica is advancing slowly, but the pandemic has boosted the adoption of this type of assets for both daily activities and investments.

The country currently lacks legislation that admits any cryptocurrency as legal tender, nor a rule that regulates transactions, investment or existence of these assets.

This puts its users in a kind of gray area, since the activities are not prohibited, but neither do they have a legal framework to provide them with a set of rules or guidelines on where and how to act.

Rodrigo Cubero, president of the Central Bank of Costa Rica (BCCR) explained that the entity decided to leave cryptocurrencies free, i.e. without regulation, so that the market can grow and then, as it progresses, analyze what kind of measures can be taken.

Use Cases in Costa Rica

Otto Mora, a blockchain specialist and consultant, explained that in Costa Rica the market is advancing slowly mainly due to the lack of a regulatory framework that allows banks not to hinder the transfer process.

In the country the main use given to cryptocurrency is for speculative or investment purposes, so that people acquire the asset keep it in their digital wallet and far from using it to acquire goods or services it is stored and eventually speculate or exchange the assets to generate more money.

Cubero added that bitcoin is mainly used for speculative investment purposes, but not so often to be used as money, so the Central Bank does not consider that it represents a financial risk or a replacement for the Costa Rican colon.

However, in Costa Rica more and more businesses are looking for ways to include digital wallets in their payment systems so that people can purchase their products and services with this means.

In the case of Costa Rica, the purchase and sale of cryptoassets is person to person, so there is a group that has a reputation in the community and performs the transactions. However, there is always the possibility of scams due to the fact that being a deregulated market, when the transfer is made there is the possibility of default.

"People contact the most reputable sellers, make a transfer through Sinpe, but they should put in the subject line comments like 'digital services' 'computer fix transaction' or similar to avoid the bank blocking the transfer" added Mora.

There are countries where businesses are dedicated to making transfers, this is not the case in Costa Rica.

According to Mora, banks are very risk averse so any suspicion that a transaction related to cryptocurrencies is being made is immediately blocked by the entity, so he warns that a good practice that the country could adopt is to continue to maintain the use and investment of cryptocurrencies under the risk of each person, but establishing a series of compensatory controls in banks to avoid misunderstandings.

"This would be good for the community and the country in general to avoid the 'gray' market of exchanges," Mora added.

As the Costa Rican cryptocurrency community grows, businesses are increasingly interested in including cryptocurrencies as payment options.

WeWork, a company in the workspace leasing sector, announced on April 20 that it will begin accepting cryptocurrencies. In partnership with BitPay and Coinbase, the firm will expand its flexibility in receiving cryptocurrency payments for incoming and outgoing transactions.

Muebles Kawa made a post indicating that part of its sales strategy included bitcoin as a means of payment. The same with the Yiyas restaurant in Guanacaste, who assure that this method of payment is becoming more and more feasible.

In addition, the Hubffee coffee shop, located in Paseo Colón, receives payments with the CR Coin cryptocurrency.

In 2017, the first and only bitcoin ATM in the country was placed, located in front of the Central Bank building, managed by the company Edenia, a member of the Blockchain Association.

Through this unit it is possible to acquire bitcoins, but some information about the person is requested, especially if the amounts are high, in order to have more security and trust.

Bitcoin ATM in San José. The only bitcoin ATM in the country is located in the Trifami building, behind the Central Bank.

Mining and Cryptocurrencies in Costa Rica

At the national level there are initiatives where cryptocurrency mining farms are being developed, one of them and the best known so far is the Digital Mining Center.

It is located in Alajuela and has a capacity for 1,000 machines, and currently has 250 machines located at the Poás hydroelectric plant.

Poás I: Eduardo Kopper Orlich when he officially inaugurated his new business of renting space and providing energy to cryptocurrency "miners" in his Poás I plant.
Poás I: One of the containers with special cryptocurrency mining equipment at the Poás I hydropower facility in Poás (Alajuela) on Saturday.

Among the services offered are temperature and humidity monitoring, high-speed fiber optics, security with surveillance cameras, cleaning maintenance and even mining machines for sale.

"At the beginning, when people talked to me about cryptocurrencies, I told them they were crazy, but then I started to investigate and I realized that all this energy that I had and ICE didn't want, could be used," added Eduardo Kooper, creator and owner of the mining center.

According to Kooper through the company, it can compete in the global cryptocurrency mining markets because in Costa Rica clean electricity is low cost, the Internet has good speed and the climate is ideal and stable throughout the year to mine bitcoins.

Those who wish to mine can go to this mining center to obtain lodging (which includes the previously mentioned services) at a lower cost, which allows people to use their equipment or that of the place without investing so much money in the electricity bill.

The country is also advancing in the creation of native cryptocurrencies. Projects have been developed that seek to attack the weak points affecting global cryptocurrencies. In a sweep through the local scenario, names such as CR Coin, PUL, Nimiq, Mango, VICU emerge.

CR Coin is a virtual means of payment accepted in a network of 43 partner merchants. The value of this currency is linked to market supply and demand.

The Initial Coin Offering, or ICO, began in January 2020 at a price of $0.15. With CR Coin there are no intermediaries and the money passes directly from person to person, from buyer to seller or between merchants. This reduces the cost of sending money as there are no fees charged by a bank, say the creators.

CR Coin In the photo, a soon-to-be operational Cr Coin ATM, with which cryptocurrencies can be exchanged or sold.

Unlike Bitcoin, this local currency does not need mining, but the 21 million virtual currencies have already been created. It is from this amount of coins, that the value for each one of them starts to be given, according to supply and demand. CR Coins are based on the Etherium blockchain.

Additionally, a group of programmers based in Santa Teresa de Cóbano developed the blockchain platform Nimiq OASIS (Open Asset Swap Interaction Scheme) for purchases and transactions with cryptocurrencies through bank transfers.

Nimiq announced an agreement with TEN31 bank in Germany to carry out operations on the platform with virtual or national currencies.

The alliance will allow the use of Nimiq OASIS, the Nimiq Wallet digital wallet and the NIM cryptocurrency in a variety of services and payments, which will be enabled in stages. "The user will be able to make daily payments," explained Ricardo Barquero, in charge of communications at Nimiq.