Mexico’s Central Bank Publishes ‘Catch-22’ Rules Impacting Crypto Exchanges
Regulating Mexico’s Crypto IndustryThe Bank of Mexico (Banxico), the country’s central bank, published a circular in the Official Gazette of the Federation on Friday detailing crypto-related provisions for the regulation of financial technology institutions (ITFs). Tomas Alvarez, CEO of Mexican crypto exchange Volabit, explained to news.Bitcoin.com on Tuesday that “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 (CNBV).” He elaborated that the same fintech law “tasked the central bank of México (Banco de México) with the responsibility of determining which cryptocurrencies were authorized to be offered to the public by these regulated companies, and gave the Bank of México 12 months to come up with a secondary law to establish some kind of framework or list of authorized cryptocurrencies.” The CEO added:
The deadline was due to expire this month so last Friday Bank of Mexico published their secondary laws which essentially stipulated that they wouldn’t authorize any cryptocurrency to be offered by regulated financial companies.
‘Catch-22’ SituationThe Bank of Mexico circular issued on Friday states that “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.” In addition, the provisions specify that “They will not be eligible for obtaining the authorization” to directly provide their clients with cryptocurrency exchange, transmission or custody services. Alvarez commented:
This is a catch-22 type of situation because, as a Mexican exchange, 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 any cryptocurrencies, making it legally impossible to operate an exchange in Mexico with the fintech law in place.
Law in EffectThe provisions in the circular are subject to public consultation until June 5. However, Alvarez noted that “Officially the law is in effect since the moment it was published (last Friday) however it only applies to regulated fintech companies of which none exist yet because the process for becoming a regulated fintech company has not been determined yet by CNBV (Mexico’s SEC).” He clarified, “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,” asserting:
It is important to note that the comments submitted during the consultation are non-binding and the general sentiment is that Bank of Mexico will ignore them.What do you think of the rules set by the Bank of Mexico? Let us know in the comments section below.
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