Buying Bitcoin for U.S. Expatriates Living in Latin America

Recently, the value of one bitcoin topped $19,000, up from $2,415 in June of 2017, and $835 in December of 2016. Although many people believe that the value of Bitcoin, a type of Cryptocurrency is over speculated, the underlying technology, known as the blockchain is here to stay.

In the United States, obtaining or liquidating bitcoin is relatively easy. Both the IRS and the Treasury Department have issued guidance, and decisions in state courts have followed federal rules, which define bitcoin as a type of intangible property (not currency). However, as expatriate, living in Latin America it can be a challenge to buy and sell Bitcoin.

Experts believe that bitcoin, cybercurrency or at least the blockchain will disrupt the banking and finance sector. At it’s heart the blockchain has the potential to eliminate much of the administrative cost associated with central banks issuing currency, initiating loans, and money transfers between business and individuals. The blockchain has big implications for e-commerce, credit card transactions and could also transform the way financial securities are initially offered and transacted through the secondary capital markets.

Options for buying bitcoin in Latin America vary, depending on the country. For example, it’s relatively easy to use the localbitcoins.com exchange and trade bitcoin with a local bank account in Mexico, Colombia, or Venezuela.

Because the bitcoin blockchain is transparent, it’s easy to track exchange volumes by country. For example, during the month of November, the average volume for Mexico on the localbitcoins.com exchange was near to $900,000. Weekly volume for Colombia and Venezuela were $2.8 million and $5.4 million respectfully.

While the Dominican Republic has recently come onto the map with about $180,000 in weekly volume, neither Cuba, Bolivia, Uruguay or any nation in Central America show any substantial volume. Weekly volume in Brazil is just under $1 million, and both Chile and Argentina report weekly volume around $270,000.

The localbitcoin.com exchange volume in the United States is about $10 million. However, there is substantially more non-transparent activity, intermediated by the coinbase.com exchange, a US Treasury licensed Money Transmitter, located in San Francisco, CA.

As an expatriate, living in country where the localbitcoins.com exchange may not be reliable, such as Costa Rica, Panama or Nicaragua, the best option for trading bitcoin may be to use your connections in the United States and setup an account with coinbase.com.

Keep in mind, however coinbase.com does not want to setup accounts for non-US residents. So, to get setup with coinbase.com you will need to have a U.S. bank account and ideally an address in a state where coinbase.com is licensed to do business. You will also need to have, or at least be able to simulate a U.S. based cell phone number with Google Voice. The later is free and easy to setup with a U.S. telephone number through either Magic Jack, Vonage, Ooma or Skype.

The best way to transfer money into your coinbase.com is through a domestic wire transfer. Credit checks may be required, but normally it’s possible to obtain a buy limit of around $100,000 per week.

Using a checking account for an ACH transfer is possible, but not ideal. It’s unlikely that coinbase.com will approve much more than $400 per week by ACH electronic check, and coinbase.com will ask for online banking credentials, or require a waiting period and verification of test deposits. Neither option is especially attractive, and underlines the inadequacies in the U.S. ACH network where transactions are fully reversible, have high administrative costs and are subject to archaic regulations.

Trying to use a credit card to buy bitcoin is also a poor option because of the high fees and unfavorable exchange rates, driven by prohibitive costs and risks inherit in the credit card processing networks. The ACH check clearing network and non-chip based credit card systems are soon to be legacy systems. Banks have recently tried to improve ACH by layering the Zelle mobile banking application onto the network. However, Bitcoin or blockchain technology may ultimately replace these systems.

Unfortunately, retail banks typically make it difficult for the average customer to work with wire transfers. This is because wire transfers occur in real time, and are unlike ACH or check transactions, which the banks process after the close of business, and settle in 2 business days. When a customer makes a mistake with a wire transfer, there is little recourse. Wire transactions are difficult to reverse.

Alternatively, lacking signed agreements, audit trails or other documentation, the transactions on the ACH and credit card networks can are generally reversible. This is of course why coinbase.com prefers wire transfers as a funding method for bitcoin. If you have trouble with your bank, then consider opening an online brokerage account that allows for wire transfers. Brokerages are subject to less regulation than banks and as a result require less paperwork and in-person transactions.

Once you have made a wire deposit into your coinbase.com account, buying and selling bitcoin is simple. However, if you plan to use bitcoin for purchases or want to secure it against the possibly of the exchange collapsing, then you should transfer the bitcoin to a secure wallet application. The ideal type of bitcoin wallet allows you to control and backup the private keys exclusively. However, keeping the bitcoin in an exchange gives you the option to speculate, quickly buying or selling bitcoin.