A circular on crypto-related provisions that regulates financial technology institutes appeared recently in the Official Gazette of the Federation. The Bank of Mexico had published the circular, thus introducing its new regulations for the crypto industry.
Almost immediately, crypto exchanges commented on the rules. Volabit CEO Tomas Alvarez discussed with Bitcoin.com the new regulations, stating
“A year ago a law to regulate fintech companies was passed by the Mexican Congress. This law stipulates that services that hold custody of users’ fiat money or cryptocurrencies (most brokers and exchange business models require this) have to apply for a license issued by the Mexican equivalent of the SEC.”
He continued that the same law also “tasked the central bank of Mexico (Banco de Mexico) with the responsibility of determining which cryptocurrencies were authorized to be offered to the public by these regulated companies, and gave the Bank of Mexico 12 months to come up with a secondary law to establish some kind of framework or list of authorized cryptocurrencies.”
Given that the deadline was scheduled to expire this month, the Bank published secondary laws, stipulating that they would not permit regulated financial companies to offer cryptocurrencies.
According to the circular, “Institutions may only enter into transactions with virtual assets that correspond to internal transactions subject to the prior authorization granted by the Bank of Mexico.” Further, banks will “not be eligible for obtaining the authorization.”
This makes it difficult for banks to offer clients transmission or custody services relating to cryptocurrency exchanges. Alvarez viewed this is a catch-22-like situation. As he stated:
“as a Mexican exchange, the law requires you become a regulated financial institution (otherwise you would be operating illegally.) however, once you obtain this license you would not have the authorization to list any cryptocurrencies, making it legally impossible to operate an exchange in Mexico with the fintech law in place.”
The public can comment on the law until June 5. This is unlikely to change things though, given that the law is officially in effect from the date it was published.
The bright spot is that the law only applies to regulated fintech companies and at this point, there are non that exist yet because there is no process identified on how to become a fintech company under the CNBV. Alvarez added,
“Fintech companies in Mexico are operating with a special waiver until the process for registration is ready thus allowing companies to register for the license. This will happen in around 6 months.”