Mexico to Implement Crypto Regulations in 2024

Mexico has secured a spot in the top 20 countries in the world for crypto adoption based on transaction volume in 2023. The country has shown significant growth in crypto adoption, with an 18% increase year-on-year on Bito’s platform, a Mexican crypto exchange with 8 million users worldwide. With its ranking at 16th in the global crypto adoption index, Mexico demonstrates promising signs of embracing the virtual era of currencies.

According to a report by Coinpedia, it is important to understand the current regulatory framework in Mexico. Let’s delve into it.

Crypto Adoption in Mexico
Mexico has made great strides in crypto adoption, moving up twelve positions in the past year to secure the 16th spot in the global crypto integration, as per Chainalysis’ Global Crypto Adoption Index. The report highlights improvements in the adoption of centralized services, retail engagement, P2P exchanges, and the value of decentralized finance.

However, regulatory concerns have hindered crypto adoption in Mexico. The lack of a comprehensive regulatory framework from Mexico’s central bank, Banxico, has discouraged individuals from fully embracing crypto as part of their financial portfolio. Let’s explore how crypto is regulated in Mexico.

Crypto Regulations in 2024
The primary regulatory framework overseeing the acquisition, sale, custody, and transfer of virtual currencies for financial entities is 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 category of assets.

Banxico has also issued Circular 4/2019, which defines 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.

Additionally, Mexico’s regulatory framework for anti-money laundering/counter-terrorist financing addresses the exchange and custody of virtual assets by non-financial entities. This framework is outlined in the Federal Law for the Prevention and Identification of Operations with Resources of Illicit Proceeds.

Regulators may utilize blockchain technology in various industries, but the use case involving virtual assets presents certain complexities.

While the Mexican regulatory framework is based on the principle of technological neutrality, in March 2019, the Financial System Stability Council, composed of six financial authorities, adopted 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 only if they have prior authorization from Banxico, but they cannot obtain authorization to directly provide exchange, transmission, or custody services to customers. To date, no financial institution has been authorized.

Taxation
Mexico currently does not have active tax regulations specifically for cryptocurrencies. The Fintech Law states that crypto is not illegal but also not legal tender. Therefore, crypto in Mexico can be treated as movable property and not as cash or currency. There are ways in which crypto transactions can still be taxed accordingly.

Crypto tax is levied on the net profit received from the sale of crypto or if the held crypto was exchanged for another coin, with rates ranging from 1.92% to 35%. Capital gains and income are taxed in the same manner in Mexico, with no distinction between the two. However, 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 for up to 3,210 times the minimum wage effective in Mexico, which is 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 at number 16 in terms of crypto adoption based on transaction volume highlights its potential in the crypto market. Mexico shows a preference for decentralized services over centralized services and has seen increased usage of crypto for P2P exchanges, ranking at position 30 out of 146 countries worldwide. Mexico is poised to become the next hub for digital currencies in Latin America, making it an exciting prospect for crypto and blockchain innovations.

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Crypto Regulations