The Bank of Mexico (Banxico) recently issued a circular, wherein it outlined its intention to give permits to Bitcoin exchange platforms and other local crypto-related businesses.
Per the Banxico’s circular, Mexican crypto businesses need to provide company profiles and comprehensive business plans to obtain the right permits.
Every profile should include different aspects of how the business operates, including know-your-customer (KYC) security measures, its business model, and transaction fees.
The circular indicates that the regulator’s principal objective is to curb crypto-based money laundering. To achieve that, it has implemented specific safeguards that would distance crypto business operations from the traditional financial sector.
A report by El Siglo de Torreón detailed that any business wanting to file their application for a permit online will have to do so with a digital certificate, helping provide confidentiality.
The filing of those who don’t have these certificates should be mailed to Banxico’s payment systems division, the Gerencia de Operación y Continuidad de Negocio de los Sistemas de Pagos.
Application for the permit started last September, but firms might need to wait until March 2020 before the new law takes effect.
The central bank has banned all regulated financial institution from transacting with crypto businesses. In an op-ed published by Coin Center, authored by Research Director Peter Van Valkenburgh and Executive Director Jerry Brito, the writers mentioned that Banxico’s actions are draconian.
“Cryptocurrency exchanges dealing in fiat currency need access to the local banking system. Under the new law, that access will be severely impeded. While the central bank can claim that they are not ‘banning’ exchanges, the effect will be the same,” the post reads.
Moreover, the authors attacked the central bank for utilizing a newly passed FinTech legislation to crack down on Mexican cryptocurrency exchanges.
“As originally envisioned, the new fintech law should have opened Mexico for innovation by not only allowing cryptocurrency exchanges to continue operating but also to provide them a reasonable path to better regulation as full-fledged financial institutions. The central bank, however, has now proposed to do the opposite, closing the door on these promising new technologies by prohibiting any regulated financial institution from offering cryptocurrency exchange, transmission, or custody services to customers.”
Included in Banxico’s arguments for its proposed law are the complexity and volatility of digital currencies, as well as their propensity to be utilized for illegal purposes.
However, Van Valkenburgh and Brito faulted the premise, noting that these properties are inherent in concepts like cars and the internet. Still, it did not stop individuals from utilizing them.
The authors concluded the op-ed by urging support as they oppose regulations, which are already at a consideration period.
Other jurisdictions such as Japan have made the same moves, aiming to create a regulatory framework for crypto companies to operate and flourish.
However, El Economista reported that the reforms proposed by Banxico might end up destroying the cryptocurrency market’s growth prospects while creating further division between Mexico’s traditional financial sector and crypto industry.
Should the Banxico get its way, the piece claimed the reforms would “limit the use of cryptocurrencies to internal use only for banks and regulated FinTech companies,” forcing crypto companies to operate outside of the law’s scope.
The publication quoted the National Banking and Securities Commission managing director Rocio Robles, who said the new laws could make different trading operations harder. Robles emphasized that although the rules will not necessarily hinder the Mexican crypto industry’s growth, its implementation would create various obstacles to its development.
With such laws in place, he claimed that digital assets “could continue to make progress in Mexico, but they will involve a lot more hard work.”