Mexico to Implement Crypto Regulations by 2024
Mexico has made significant strides in crypto adoption, ranking in the top 20 countries in the world in 2023 based on total transaction volume. The country’s impressive growth in crypto adoption is evident in the 18% year-on-year surge on Bito’s platform, a Mexican crypto exchange with a global user base of 8 million. With a 16th place ranking in the global crypto adoption index, Mexico is showing promising signs of embracing the virtual era of currencies.
In this article by Coinpedia, we will explore the current regulatory framework in Mexico that governs the use of cryptocurrencies.
Crypto Adoption in Mexico
Over the past year, Mexico has climbed twelve positions in the crypto adoption rankings, securing the 16th spot in terms of integration, according to Chainalysis’ Global Crypto Adoption Index. The report highlights improvements in centralized services adoption, retail engagement, P2P exchanges, and the value of decentralized finance.
However, regulatory concerns have been a hindrance to crypto adoption in Mexico. The lack of a comprehensive regulatory framework from Mexico’s central bank, Banxico, has deterred citizens from fully embracing cryptocurrencies as part of their financial portfolio. Let’s delve into the regulations surrounding crypto in Mexico.
Crypto Regulations in 2024
The primary regulatory framework overseeing the acquisition, sale, custody, and transfer of virtual currencies for financial institutions is known as the “Law Regulating Financial Technology Institutions” or the ‘Fintech Law’.
The Fintech Law defines virtual assets and establishes the major requirements for financial institutions to internally operate with this asset category.
Additionally, the Mexican Central Bank (Banxico) has issued Circular 4/2019, which outlines the characteristics of virtual assets that institutions can operate with and establishes the terms, conditions, and restrictions applicable to transactions carried out by financial institutions.
Furthermore, Mexico’s anti-money laundering/counter-terrorist financing regulatory framework addresses the exchange and custody of virtual assets by non-financial entities. This regulatory framework is outlined in the Federal Law for the Prevention and Identification of Operations with Resources of Illicit Proceeds.
Regulators in Mexico may utilize blockchain technology in various industries. However, the use of blockchain technology involving virtual assets presents certain complexities.
While Mexico’s regulatory framework is based on the principle of technological neutrality, the Financial System Stability Council, consisting of six financial authorities, decided in March 2019 to adopt a conservative approach towards virtual assets. They emphasized the need to maintain a “healthy distance” between virtual assets and the Mexican financial system. This position was reaffirmed on June 29, 2021.
On June 28, 2021, the main financial regulators, CNBV, SHCP, and Banxico, issued a joint statement clarifying that virtual assets are not legal tender in Mexico. Financial institutions can carry out operations with virtual assets if they have prior authorization from Banxico. However, they are not authorized to provide exchange, transmission, or custody services directly to customers. To date, no financial institution has been granted this authorization.
Taxation
Mexico currently does not have an active tax rule specifically for cryptocurrencies. The Fintech Law categorizes crypto as neither illegal nor legal tender. Therefore, crypto in Mexico is taxed as movable property rather than cash or currency. However, there are ways in which crypto transactions can still be subject to taxation.
Crypto tax is imposed on the net profit received from the sale of crypto or the exchange of held crypto for another coin. The tax rates range from 1.92% to 35%. In Mexico, capital gains and income are taxed in the same manner, with no distinction between the two. Capital gains below 90,000 Mexican pesos may cover a significant number of crypto transactions and are exempt from taxes.
Legal Status Overview
In Mexico, Bitcoin is considered legitimate and recognized as a means of payment and value transmission, although it is not a legal currency. For example, one can purchase a car worth up to 3,210 times the minimum wage effective in Mexico, approximately MXN $225,000 or USD $13,400, using Bitcoin.
Bitcoin:
– Not a legal tender
DeFi:
– Legal
Mining:
– Legal
Trading:
– Legal
NFTs:
– Legal
Future Prospects and Challenges
Mexico’s ranking as the 16th country in terms of crypto adoption based on transaction volume highlights its preference for decentralized services over centralized ones. Mexicans have also increased their usage of crypto for P2P exchanges, ranking 30th out of 146 countries worldwide. Mexico has the potential to become the next hub for digital currencies in Latin America, making it an emerging hotbed for crypto and blockchain innovations.
In conclusion, Mexico’s crypto adoption is growing steadily, and its regulatory framework is evolving to accommodate this emerging industry. With promising signs of adaptation to the virtual era of currencies, Mexico is poised to become a significant player in the Latin American cryptocurrency scene.
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