Mexico has recently proposed new financial technology regulations which would force banks to cut off all business with accounts dealing in exchanging cryptocurrency and fiat.
These restrictions would essentially force cryptocurrency exchanges and custody services operating in Mexico to close up shop and take their business elsewhere.
At a time when many countries are making steps towards sensible and mutually beneficial regulations, Mexico is choosing to go in the other direction. This could potentially put Mexico behind in the event that the technology becomes adopted on a massive worldwide scale.
Run Them Out of Town
The Fintech Law that is in place in Mexico went into effect in March of 2018. One of the main provisions gave financial authorities the power to permit entities to operate in Mexico as Fintech Institutions (FTIs) following an application process.
Under recently proposed regulations, these FTIs would be prohibited from ‘offering cryptocurrency exchange, transmission, or custody services to customers.’ These proposed regulations are currently in a 60-day grace period in which the public can submit their comments and opinions.
The passing of these provisions would make for a ‘damned if they do, damned if they don’t’ situation that exchanges and custody services cannot win. They need to register as FTIs in order to operate, but then get blocked from using banking services, essentially cutting off their fiat supply.
This will affect popular cryptocurrency exchanges Volabit and Bitso whose accounts can be funded currently by bank transfer or by cash purchases at any 7-Eleven.
Who’s In, Who’s Out
If Mexico chooses to allow these provisions, it will be on similar grounds with countries like India who have also prohibited banks from doing business with virtual currency exchanges. Due to those rules, India’s cryptocurrency exchanges, including the top-ranked Zebpay, were forced to abandon operating in India because they no longer had access to cash to pay out its customers.
This ultimately only creates a need for black market money services and leaves honest cryptocurrency users no legal way to move funds between crypto and fiat.
Many other countries and regions have begun to adopt a positive legal framework for digital currencies and already beginning to benefit from an influx of new jobs and capital to support blockchain-based startups.
If Mexico puts little effort into researching the technology behind cryptocurrencies, or how beneficial they can be, it will only impede the development of worldwide blockchain adoption.
Do you think Mexico will move forward with instating these regulations? Will more major countries start to roll out new fintech and cryptocurrency laws this year? Let us know your thoughts in the comments below!