Look at history and it’s easy to see that adaptation of almost any kind is almost always slow and, in the best of cases, deliberate. It can be even more complicated when it involves fundamental changes to what many see as outdated norms, regulations, and rules governing national economies, international banking, and now, even the real estate industry. So, is crypto regulated in Costa Rica – and can you use it to buy real estate?
Current status: It’s complicated.
That’s why everyone involved – from brokers, realtors, and developers, to buyers, sellers, and investors – should closely monitor the ongoing crypto-real estate trend that has swept many cities, countries, and regions around the world – and that we’re currently beginning to foresee, if not quite experience (yet) here in Costa Rica.
So, let’s start with this: We don’t know everything. No one knows everything (despite what certain online sources might claim), as Costa Rica’s legislators still haven’t decided or even signed anything into law; there is no official yay or nay, as far as Costa Rican regulations and cryptocurrency go. As it is in so many other countries, this is still a liminal area.
That’s not to say we don’t have some information, however. Here’s what is known, as of mid-2024:
Costa Rica: A Rising Star in Cryptocurrency Adoption
Costa Rica ranks 91st globally in 2023 Chainalysis’ Global Cryptocurrency Adoption Index, which cites the country’s widespread adoption of cryptocurrencies, as businesses are increasingly accepting crypto as payment. “It is not surprising that Costa Rica has 6 Bitcoin ATMs for a population of only 5 million, as this is a country where workers can receive a portion of their salaries in crypto,” the report noted.
The report also underscores our relatively swift adaptation to cryptocurrency adoption and blockchain technology, stating that Costa Rica “has become a hub for cryptocurrencies,” with companies like Asos Blockchain, which unites the country’s leading web3 developers, organizing events such as The Tico Blockchain Conference and the community-led Crypto Cantina.
The Full Picture: Costa Rica’s Global Crypto Adoption Index Rankings
The Global Cryptocurrency Adoption Index officially consists of five sub-indexes that are based on a country’s use of different cryptocurrency services, with rankings weighted according to various factors like population size and purchasing power.
Costa Rica’s Overall Ranking: 84 (out of 155 ranked countries). Here’s how Costa Rica stacks up, based on each sub-index:
Centralized Service Value Received
The first sub-index evaluates on-chain cryptocurrency value received at centralized exchanges, weighted by purchasing power parity (PPP) per capita, to favor countries where cryptocurrency activity is more significant relative to average wealth.
Costa Rica’s Ranking: 84
Retail Centralized Service Value Received
This second sub-index measures on-chain retail value received at centralized exchanges, focusing on transactions under $10,000 and weighted by PPP per capita, highlighting non-professional users.
Costa Rica’s Ranking: 100
P2P Exchange Trade Volume
The third sub-index assesses peer-to-peer (P2P) exchange trade volume, weighted by PPP per capita and the number of internet users, to emphasize countries where a larger share of residents’ wealth is invested in P2P transactions.
Costa Rica’s Ranking: 103
DeFi Value Received
This fourth sub-index examines on-chain cryptocurrency value received from decentralized finance (DeFi) protocols, weighted by PPP per capita, to spotlight countries with high DeFi activity relative to their wealth.
Costa Rica’s Ranking: 86
Retail deFi Value Received
The fifth and final sub-index ranks countries by DeFi transaction volume in retail-sized transfers, also weighted by PPP per capita, to highlight individual users’ DeFi activity.
Costa Rica’s Ranking: 86
For a full explanation and analysis of the ranking criteria and calculations, please download the full report.
Costa Rica Has Long Been Friendly to Investment
Costa Rica’s political stability, high standard of living, investment opportunities, and thriving tourism and business climates have long made it a popular destination for savvy investors and multinationals. It stands to reason that the nation’s governance now also has its eye on cryptocurrency investment.
Since 1990, the nation’s tourism industry has witnessed 7.4% year-on-year growth, and Costa Rica has racked up accolades, including as the #1 for the Greenfield FDI Performance Index, a World Bank success story, the World’s Happiest Country, and a top-5 choice for international retirement.
Costa Rica also stands out as one of the world’s most attractive investment markets. In addition to ranking #1 in the Human Development Index in Central America (UNDP, 2021) and #1 in innovation in Central America (WIPO, 2021), here are a few more indicators:
- Costa Rica receives 2.5+ million annual international tourists;
- An investment ally for more than 400 multinationals;
- Latin America’s #3 for intellectual property rights;
- High regional ranking on the 2022 Freedom in the World Country Report;
- A World Bank success story;
- The world’s #11 country, according to the BTI Transformation Index;
- The World’s Happiest Country;
- A top-5 global retirement paradise;
- One of the globe’s most family-friendly destinations;
- And more.
Costa Rica has a decades-long reputation for promoting investment in the country, both via individuals and multinationals. The writing is on the wall: cryptocurrency is the next investment frontier and Costa Rica will want to be in on it.
For a full picture of Costa Rica’s investment climate, please download our CEO and founder’s free eBook, Profit in Paradise: The Investor’s Guide to Costa Rica.
However, Costa Rica’s Crypto Legislation is Still Developing
Long recognized for our progressive and eco-friendly policies, Costa Rica is working to extend its innovative mindset to digital currencies, creating a regulatory environment that fosters technological advancement while ensuring financial security and consumer protection.
Costa Rica’s regulatory stance on cryptocurrency has to date evolved progressively, aligning with global trends and recognizing the sector’s benefits and risks. Initially cautious due to concerns about market volatility, potential misuse in illegal activities, and impacts on the financial system, the country’s governance has taken small steps toward adapting the country’s regulatory framework, as cryptocurrencies gain global acceptance.
According to local attorney Adrián Obando, of Cresco Legal, “In Costa Rica, ‘the law allows everything that is not expressly prohibited.’ That means any citizen can trade in crypto, own crypto, provide crypto-related services, because there is currently no law prohibiting these activities.”
Private Letter Ruling: Article 119 of the Tax Code
In August 2023, Costa Rican tax authorities (Hacienda) issued a private letter ruling (No. MH-DGT-OF-0460—2023) related to how the country’s tax regulations would treat crypto assets. Notably, private letter rulings are for information purposes only. However, this marked a key development, as it is an extra-official (pending official legislation) recognition of cryptocurrency as a legally legitimate asset class.
The private letter ruling clarified that cryptocurrencies, not being recognized as legal tender by the Central Bank of Costa Rica, are considered virtual assets (intangible assets). These virtual assets are subject to various taxes, as applicable, which may include the Corporate Income Tax (CIT), the Tax on Capital Income and Capital Gains, and Value Added Tax (VAT).
The ruling also outlines tax obligations for service providers involved in safeguarding cryptographic keys, storing and transferring virtual assets, exchanging virtual assets, or assisting in these operations. In summary, both resident and non-resident providers and investors are subject to various taxes, including the CIT and the Tax on Capital Income and Capital Gains on purchases or personal transfers, potential returns, and any income from the acquisition or sale of virtual assets.
See the private letter ruling for full details.
The Current Debate: Cryptocurrency Legislation
Obando clarifies, “The Ministry of Finance has characterized cryptocurrencies as assets; however, as of today, the Ministry does not have a way to audit crypto ownership, nor any clear policies to impose taxes on its owners.”
That said, as of 2024, Costa Rica is currently considering a proposed crypto assets law that could limit citizens’ ability to use Bitcoin for everyday transactions.
Jan3, a notable Bitcoin technology firm, reported this development, emphasizing that the lack of comprehensive legislation on crypto ownership, trading, and investment is influencing the debate. Key concerns include effective Know Your Customer (KYC) and Anti-Money Laundering (AML) practices – well established in the international banking industry, but still underway in the emerging industry of cryptocurrency.
Crypto has Costa Rican Congresswoman Johanna Obando on its side, as she is a prominent advocate for Bitcoin in Costa Rica, emphasizing its transformative potential and guiding the debates in a positive direction. The tourism sector, a major contributor to Costa Rica’s GDP, is also anticipated to play a key role in promoting Bitcoin adoption, as crypto could impact current and future businesses as a payment option for tourism-related services.
Costa Rica’s current considerations reflect broader trends in Latin America, where cryptocurrency adoption is growing due to economic instability, failed monetary policies, and high inflation. Time will certainly tell – and likely soon! Stay tuned.
So, Can You Buy Real Estate with Cryptocurrency in Costa Rica?
Attorney Obando weighs in, “”Based on the aforementioned principle that ‘the law allows everything that is not expressly prohibited; in relation to private law subjects, a home’s sale price could be agreed between the parties in some type of cryptocurrency.
“For the registration of the transfer document before the Real Estate Registry, the seller’s declaration of receiving the price – in an equivalent value in legal tender currency – to their satisfaction would be sufficient. As for the buyer’s sworn declaration on the origin of funds, which is not a registration requirement but a formal and legal requirement, they must truthfully state the amount of the transaction in the cryptocurrency used, the equivalent value in legal tender, and the legitimate origin of these resources.
“Given the novelty of this topic, the governing bodies in notarial matters will have to issue the relevant criteria and guidelines as this practice becomes standardized in the country.”
(Some of) The Pros and Cons of Cryptocurrency in Costa Rica
Both governments and individual users recognize that there are both pros and cons, advantages and disadvantages to accepting digital currencies as legal tender.
While some benefits are speculative due to the relative novelty or newness of cryptocurrencies, they hold significant potential:
- Autonomy in Transactions: Cryptocurrency transactions are peer-to-peer, which means that users no longer need banks as intermediaries. This autonomy allows users to manage their funds independently, avoiding fees associated with overdrafts, minimum account balances, and returned deposits.
- Decentralization: Cryptocurrencies are not tied to any central bank or government agency, making them attractive for those looking to avoid the inflationary pressures and volatility associated with traditional currencies. (Case in point: The Costa Rican colón, for example, has fluctuated nearly ¢200 per $1 over the last couple of years, at times representing nearly a 30% drop in USD buying power.) By eliminating reliance on the Costa Rican Central Bank, cryptocurrency owners can potentially evade the economic fluctuations in the colón.
- Security: Transactions are secured through a network of thousands of computers that record and track each transaction on a blockchain. This creates a digital ledger that ensures security and transparency without the need for third-party involvement. Additionally, the irreversible nature of cryptocurrency transactions guarantees payment completion.
- Borderless Transactions: Digital currencies are not confined to any single country or government institution, making them ideal for international transactions. Cryptocurrencies eliminate the need for currency exchange and reduce the costs associated with international wire transfers.
Despite the advantages, there are still significant concerns associated with substituting physical cash with cryptocurrency:
- Semi-Anonymity: Some cryptocurrencies offer more anonymity than others, but digital currency’s anonymity raises concerns about the potential for illegal activities, such as tax evasion and money laundering, which Costa Rican banks have long worked to combat.
- Online Threats: Despite blockchain technology being one of the most secure cybersecurity measures in recent history, cryptocurrencies are not immune to online threats. As new cryptocurrencies emerge, their security depends on the custodians who manage them. Standard risks such as data hacking and extortion remain prevalent.
- Volatility & Risk: Historically, cryptocurrency valuations have shown they can be highly volatile, leading to significant financial risk for investors and users. Sudden changes in market sentiment can result in rapid price fluctuations.
- Security Risks: While blockchain technology is secure, the digital nature of cryptocurrencies makes them susceptible to hacking and cyberattacks.
As Costa Rica perfects its legislation and regulations, its legislators will certainly be working to mitigate the risks and reap the benefits of cryptocurrency transactions, including for real estate. We’re excited to witness the developments!
Want to Discuss Costa Rica Cryptocurrency for Real Estate & Investment Purposes?
If you’re looking for an investment in Costa Rica, then welcome to our wheelhouse! From luxury hotels to water sports businesses, from vacation homes to service industry businesses, we broker, offer, and represent a wide range of Costa Rica investment properties for your consideration.
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