Crypto rules

Mexico warns about cryptocurrencies while embracing fintechs.

In a joint statement released on 28 June, the Central Bank of Mexico, the Ministry of Finance and the Securities Commission (“CNBV”) said that cryptocurrencies are not legal tender in Mexico and warned that financial institutions operating with them are subject to sanctions.

A legal strategy & development executive at a global bank in Mexico reminded us that this wasn’t the first warning, “Mexico has been clear about the risks posed by virtual assets – similar warnings were communicated in 2014 and 2017. There is some government inertia behind the decision not to recognise cryptocurrencies but we aren’t looking seriously at doing anything internally either.”

“There is some government inertia behind the decision not to recognise cryptocurrencies but we aren’t looking seriously at doing anything internally either.”

Legal strategy & development executive, global bank, Mexico

The government’s recent statement was seen as a reaction to the comments of Ricardo Salinas Pliego, a Mexican billionaire with the third largest fortune in the country, who recommended the use of bitcoin and affirmed that his bank, Banco Azteca, was working to become the first financial institution in the country to operate with cryptocurrencies.

Minister of Finance Arturo Herrera later emphasised that the prohibition on the use of cryptocurrencies in Mexico will likely not change in the medium term. Herrera warned about the risks associated with the instability of cryptocurrencies and said that Mexican law banned the use of virtual currencies.

Ironically, Mexico is home to the largest cryptocurrency exchange and financial services platform, Bitso. In December 2020, the company closed a USD 62 million financing round which it aims to use to capitalise on a potential boom in cryptocurrency investors in Latin America.

More broadly, Mexico’s diverse and robust financial industry is still hindered by the limited financial level of inclusion in the local population. Estimates indicate that half of the adult population does not have a bank account. The government recently passed a fintech law to promote the use of CoDi, a new instant payments system which has 5.1 million users registered in little more than a year. Nevertheless, the Mexican government continues to be reluctant to use cryptocurrencies as a tool to advance financial inclusion in the country.

“Fintech is gaining more traction, especially transactional APIs, it will be very important for the development of the financial system.”

Legal strategy & development executive, global bank, Mexico

The development executive concluded, “There is a problem with financial inclusion in Mexico and cryptocurrencies are one way to tackle it, but they are not the only way. Fintech is gaining more traction, especially transactional APIs, it will be very important for the development of the financial system. 21 fintech companies have been authorised to operate in Mexico and another 20 authorisations are pending. It has created a bit of a regulatory challenge for incumbent banks though, because fintechs are given much more room to offer services than we are.”

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