Mexico’s Central Bank has published new crypto related rules which has left many industry players confused as to the ramifications of the new provisions.
The new rules which were published by the central bank in the federations official gazette before the weekend stated that the Bank of Mexico (Banxico) “stipulated that they wouldn’t authorize any cryptocurrency to be offered by regulated financial companies.”
The confusion lies in the fact that fintech law brought in 12 months ago simply requires exchanges to put in an application for an operating license. Toma Alvarez, CEO of Mexican exchange Volabit explains how that law operates:
“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 (CNBV).”
Alverez adds that the idea at the time was that the responsibility would be with the central bank to determine which cryptocurrencies were to be offered by the regulated companies and come up with a workable framework to facilitate this. The new ruling is in complete contradiction to this.
A catch-22 scenario now exists as a result because the law requires you to 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 cryptocurrencies, thereby making it legally impossible to operate an exchange in Mexico under the new law. The Central Bank explains:
“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.” and adds, “They will not be eligible for obtaining the authorization” to directly provide their clients with cryptocurrency exchange, transmission or custody services.
Alvarez explained that exchanges are awaiting further clarification as to how this impasse might be overcome for current exchanges and comments:
“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.”
However how useful this license will be when issued remains to be clarified. This is not the first punitive ruling affecting the industry after financial entities were required to identify customers involved in cryptocurrency trading late last year.
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