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Puerto Rico

Retail_Trading_Status

Allowed-Regulated Unknown
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Analysis ID
#561
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Created
2025-06-26 13:28
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Executive Summary

Retail trading of cryptocurrencies is legally permitted in Puerto Rico and is subject to regulation. As a U.S. territory, Puerto Rico adheres to U.S. federal regulations, including AML/KYC policies enforced by FinCEN. The Office of the Commissioner of Financial Institutions (OCIF) also oversees financial activities involving digital assets and requires cryptocurrency exchanges to obtain licenses, specifically as Money Services Businesses (MSBs), under the Puerto Rico Money Transmitter Act. The island has also provided attractive tax incentives, however, there is proposed U.S. federal legislation to address concerns about these tax incentives.

Key Pillars

The key regulatory pillars in Puerto Rico include: 1) the primary regulator, the Office of the Commissioner of Financial Institutions (OCIF), which oversees financial activities involving digital assets and ensures compliance with existing laws; 2) adherence to U.S. federal laws, including AML/KYC enforced by FinCEN; and 3) licensing requirements for cryptocurrency exchanges and virtual asset service providers (VASPs) under the Puerto Rico Money Transmitter Act.

Landmark Laws

The landmark legislations include: 1) The Puerto Rico Money Transmitter Act, which requires cryptocurrency exchanges to obtain licenses from the Office of the Commissioner of Financial Institutions (OCIF); 2) Act 20 and Act 22 (now consolidated into Act 60), which provide attractive tax incentives for crypto investors who become bona fide residents; and 3) Proposed U.S. federal legislation, the 'Fair Taxation of Digital Assets in Puerto Rico Act of 2025,' which aims to address concerns about the use of Puerto Rico's tax incentives by wealthy crypto investors.

Considerations

Important considerations include: 1) Cryptocurrency exchanges must obtain licenses from the OCIF as Money Services Businesses (MSBs) and comply with the Puerto Rico Money Transmitter Act; 2) Puerto Rico offers tax benefits for crypto investors who become bona fide residents, potentially including a 0% capital gains tax; 3) The OCIF has taken action against entities operating without proper licensing, highlighting the importance of compliance; and 4) Proposed U.S. federal legislation seeks to address concerns about the use of tax incentives and its impact on the local economy and federal tax revenue.

Notes

Historically, Puerto Rico has positioned itself as a crypto-friendly jurisdiction, attracting crypto entrepreneurs and investors through tax incentives provided under Act 20 and Act 22 (now Act 60). In 2021, OCIF commissioner Natalia Zequeira defended the lack of formal regulation as an aversion to innovation. The OCIF later authorized digital-asset custody and settlement services to FV Bank in November 2022. However, the OCIF also ordered Athena to cease and desist cryptocurrency operations until it obtained an MSB license, following concerns about unregulated BATMs being linked to irregular transactions. The "Fair Taxation of Digital Assets in Puerto Rico Act of 2025" aims to end crypto tax breaks in Puerto Rico.

Detailed Explanation

Retail trading of cryptocurrencies is legally permitted in Puerto Rico, with a regulatory environment characterized by a dual framework. As a U.S. territory, Puerto Rico adheres to U.S. federal regulations, including robust Anti-Money Laundering (AML) and Know Your Customer (KYC) policies enforced by the Financial Crimes Enforcement Network (FinCEN). FinCEN is considered the primary AML/CFT regulator. Simultaneously, the Office of the Commissioner of Financial Institutions (OCIF) plays a role in overseeing financial activities involving digital assets at the local level. Historically, Puerto Rico has sought to position itself as a crypto-friendly jurisdiction due to attractive tax incentives under Act 20 and Act 22 (now consolidated into Act 60), offering potential 0% capital gains tax on crypto assets for qualifying residents and low corporate tax rates for businesses. Cryptocurrency exchanges operating in Puerto Rico are required to obtain licenses, typically as Money Services Businesses (MSBs), from the OCIF and must comply with the Puerto Rico Money Transmitter Act, including implementing security measures. The OCIF has authorized certain digital-asset services, such as custody for cryptocurrencies, exemplified by FV Bank receiving permission to provide custody services for major cryptocurrencies. While the environment is generally permissive, the OCIF has taken action against entities operating without proper licensing, such as ordering Athena to cease operations until it obtained an MSB license after unregulated BATMs were linked to irregular transactions. Proposed U.S. federal legislation, such as the "Fair Taxation of Digital Assets in Puerto Rico Act of 2025," aims to address concerns about the use of Puerto Rico's tax incentives by wealthy crypto investors and the potential impact on the local economy and federal tax revenue. For private investors who earn bona‑fide status, Puerto Rico places no tax on crypto trades, swaps, or staking rewards, provided they meet specific criteria, including residing on the island for at least 183 days per calendar year. The island's government has also shown interest in exploring blockchain technology for public services. OCIF Commissioner Natalia Zequeira defended a lack of formal regulation in 2021 as an aversion to innovation, but later authorized digital-asset custody and settlement services to FV Bank in November 2022.

Summary Points

Retail Trading of Cryptocurrency in Puerto Rico: Regulatory Overview

Status: Allowed-Regulated

I. Regulatory Bodies & Roles:

  • U.S. Federal Level:
    • Financial Crimes Enforcement Network (FinCEN): Primary AML/CFT regulator. Enforces AML/KYC policies.
  • Puerto Rico Local Level:
    • Office of the Commissioner of Financial Institutions (OCIF): Oversees financial activities involving digital assets.
      • Licenses Money Services Businesses (MSBs), including cryptocurrency exchanges.
      • Provides guidance and oversight to ensure compliance.
      • Authorizes digital-asset services (e.g., custody).
      • Takes action against entities operating without proper licensing.

II. Key Legislation & Regulations:

  • U.S. Federal Laws:
    • AML/KYC regulations enforced by FinCEN.
  • Puerto Rico Laws:
    • Puerto Rico Money Transmitter Act: Requires cryptocurrency exchanges to obtain licenses from OCIF.
    • Act 136-2010: Defines crypto and virtual currency companies that receive money for transmission or exchange digital assets as Money Services Businesses (MSBs) and requires licensing by the OCIF.
    • Act 20 & Act 22 (now consolidated into Act 60): Tax incentives for bona fide residents and qualifying businesses.

III. Compliance Requirements:

  • AML/KYC Compliance: Cryptocurrency exchanges and financial institutions must implement robust AML/KYC policies.
  • Licensing: Cryptocurrency exchanges operating in Puerto Rico must obtain licenses from the OCIF, often as Money Services Businesses (MSBs).
  • Security Measures: Implement security measures to protect user funds and personal information.
  • Reporting: Exchanges report suspicious transactions to authorities.

IV. Notable Restrictions & Limitations:

  • Licensing Required: Operating a cryptocurrency exchange without proper licensing from the OCIF is prohibited.
  • Regulatory Scrutiny: OCIF actively monitors and enforces compliance, taking action against unlicensed entities.
  • Potential Tax Changes: Proposed U.S. federal legislation ("Fair Taxation of Digital Assets in Puerto Rico Act of 2025") could alter the tax landscape for crypto assets.

V. Tax Incentives (Subject to Change):

  • Potential 0% Capital Gains Tax: For bona fide residents who meet specific criteria under Act 60.
    • Requirements:
      • Log at least 183 days per calendar year on the island.
      • Declare Puerto Rico as your primary tax home.
      • Prove stronger ties (home, bank, family) there than anywhere else.
  • Low Corporate Tax Rate: For qualifying businesses.

VI. Recent Developments & Changes:

  • Proposed Federal Legislation: The "Fair Taxation of Digital Assets in Puerto Rico Act of 2025" aims to address concerns about tax incentives and their impact.
  • OCIF Enforcement: OCIF continues to enforce licensing requirements and monitor cryptocurrency activities.
  • OCIF Authorizations: OCIF has authorized certain digital-asset services, such as custody for cryptocurrencies (e.g., FV Bank).
  • Government Interest in Blockchain: The island's government has shown interest in exploring blockchain technology for public services.

Full Analysis Report

Report on Retail_Trading_Status in Puerto Rico

Date: 2025-06-26

Topic: Retail_Trading_Status

Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

Retail_Trading_Status: Allowed-Regulated

1. Most Accurate Current Status: Allowed-Regulated

2. Detailed Narrative Explanation:

Individual citizens and residents in Puerto Rico are legally permitted to buy, sell, and hold cryptocurrencies. The regulatory environment in Puerto Rico is characterized by a dual framework: as a U.S. territory, financial institutions and cryptocurrency exchanges operating in Puerto Rico must comply with federal U.S. regulations, including robust Anti-Money Laundering (AML) and Know Your Customer (KYC) policies enforced by the Financial Crimes Enforcement Network (FinCEN). Additionally, Puerto Rico has its own local regulatory body, the Office of the Commissioner of Financial Institutions (OCIF), which plays a role in overseeing financial activities involving digital assets.

Historically, Puerto Rico has positioned itself as a crypto-friendly jurisdiction, particularly due to attractive tax incentives established under Act 20 and Act 22 (now consolidated into Act 60). These incentives offer significant benefits, such as a potential 0% capital gains tax on crypto assets for bona fide residents who meet specific criteria, and a low corporate tax rate for qualifying businesses. This has attracted numerous crypto entrepreneurs and investors to the island.

Cryptocurrency exchanges operating in Puerto Rico are required to obtain licenses, often as Money Services Businesses (MSBs), from the OCIF and must comply with the Puerto Rico Money Transmitter Act. This includes implementing security measures to protect user funds and personal information. The OCIF has authorized certain digital-asset services, such as custody for cryptocurrencies. For instance, FV Bank received permission from OCIF to provide custody services for major cryptocurrencies.

While the environment is generally permissive and even encouraging for cryptocurrency activities, it is not without regulatory scrutiny. The OCIF has taken action against entities operating without proper licensing, highlighting the importance of compliance. Furthermore, there are ongoing discussions and even proposed U.S. federal legislation (such as the "Fair Taxation of Digital Assets in Puerto Rico Act of 2025") that aim to address concerns about the use of Puerto Rico's tax incentives by wealthy crypto investors and the potential impact on the local economy and federal tax revenue. These proposals, if enacted, could alter the tax landscape for crypto assets in Puerto Rico.

In summary, retail trading of cryptocurrencies is allowed in Puerto Rico. It is regulated through a combination of U.S. federal laws (primarily AML/KYC enforced by FinCEN) and local oversight by the OCIF, which includes licensing requirements for exchanges and other virtual asset service providers (VASPs). The island's government has also shown interest in exploring blockchain technology for public services.

3. Specific, Relevant Text Excerpts:

  • Kryptos.io (2025-02-03): "Since Puerto Rico is a U.S. territory, financial institutions and cryptocurrency exchanges operating in Puerto Rico are required to comply with U.S. regulations, including Anti-Money Laundering (AML) and Know Your Customer (KYC) policies. Exchanges report suspicious transactions to authorities, which could include cryptocurrency activities."
  • CoinLedger (2025): "Trading cryptocurrency in Puerto Rico is fully legal. In fact, the territory offers tax benefits for crypto investors."
  • BYDFi (Jun 09, 2022): "Legal regulations for cryptocurrency exchanges in Puerto Rico are designed to create a secure and transparent environment for digital asset trading. Exchanges must obtain licenses from the Office of the Commissioner of Financial Institutions (OCFI) and comply with the Puerto Rico Money Transmitter Act."
  • UPay Blog (2025-03-13): "In Puerto Rico, the Office of the Commissioner of Financial Institutions (OCIF) plays a role in regulating financial activities, including those involving digital assets. They work to provide guidance and oversight to ensure compliance with existing laws. For instance, if a company wants to operate a cryptocurrency exchange in Puerto Rico, they will need to register with OCIF and comply with anti-money laundering (AML) and know-your-customer (KYC) requirements."
  • Freeman Law: "Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity." (While this quote refers to miners, it underscores FinCEN's role which also applies to exchanges).
  • TokenTax (2025-06-21): "For private investors who earn bona‑fide status, Puerto Rico places no tax on crypto trades, swaps, or staking rewards. To keep that privilege, you must log at least 183 days per calendar year on the island, declare Puerto Rico as your primary tax home, and prove stronger ties (home, bank, family) there than anywhere else."
  • Manimama Law Firm (2024-12-03): "Crypto and virtual currency companies that receive money for transmission or exchange digital assets fall under the definition of a Money Services Business in Puerto Rico. According to Act 136-2010, these businesses must be licensed by the Office of the Commissioner of Financial Institutions (OCIF)."
  • Wikipedia - Cryptocurrencies in Puerto Rico (referencing a February 2022 report): "In 2021, OCIF commissioner Natalia Zequeira defended that a lack for formal regulation responded to an aversion to "innovation" in entities such as FDIC. She was later responsible for licensing the digital-asset custody and settlement services that the office authorized to FV Bank in November 2022. OCIF also ordered Athena to cease and desist its cryptocurrency operations in Puerto Rico until it received a MSB from the government, this after the unregulated operation of the BATMs was linked to irregular transactions involving stolen money and fake IDs in the municipality of Manatí."
  • MemberCheck: "Puerto Rico is an unincorporated territory of the United States. Therefore most U.S. federal laws apply to Puerto Rico and the U.S. is responsible for monitoring and regulating Anti Money Laundering (AML) activities in Puerto Rico. The Financial Crimes Enforcement Network (FinCEN) is the primary AML/CFT regulator in the United States and Puerto Rico."

4. Direct, Accessible URL Links to Sources:

Web Sources (21)

Sources discovered via web search grounding

Search queries used (7)
  • current status of retail cryptocurrency trading in Puerto Rico 2025
  • Puerto Rico cryptocurrency regulation retail
  • Puerto Rico OCIF cryptocurrency guidelines
  • Are individuals in Puerto Rico allowed to buy and sell cryptocurrencies?
  • KYC/AML regulations for cryptocurrency exchanges in Puerto Rico
  • Puerto Rico cryptocurrency laws for residents
  • Official statements on cryptocurrency trading Puerto Rico
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