New Mexican Crypto Regulations Could Hurt the Market, Banks Say
Because of how new the blockchain and cryptocurrency sector is to much of the world, regulators continue to scramble in an effort to figure out how traders and exchanges might fit into their existing laws for regulation. Some countries haven’t even spoken on the important issue, while some EU nations have already rolled out their own comprehensive plans to respond to the influx of public participation in the ever-evolving cryptocurrency markets.
The Bank of Mexico made an important move on the road to the regulation of cryptocurrencies on Monday, releasing an official update to its existing policy on cryptocurrency investors and their place in the financial framework of the country. Specifically, the new policy prohibits financial bodies in Mexico from providing some financial services to retail, or average, investors in cryptocurrency. Along with a general ban on providing services to this class of investors, the policy also rolled out a host of new regulations regarding the identity verification and transparency process required for banks to do business with crypto-holders.
The policy was not well-received by the financial institutions to which they applied, many of which argue that the new regulations will be harmful to the growing market, a market that is largely still in its infancy within Mexico.
Most of the new laws from the Bank of Mexico respond to key concerns of money laundering and financial fraud using cryptocurrencies. In order for a bank to do business with a customer using cryptocurrency, the new regulations require banks to put in place some method of effectively verifying and recording the identity of the trader.
Additionally, banking service providers will be prohibited from allowing consumers to open up their own new accounts with cryptocurrency involvement, and any crypto or fiat money sent to existing crypto-related accounts will be required to pass additional verification and identity tests.
Another law to come from this recent policy change is that financial service providers and banks will be disallowed to allow clients to access their funds in the same day that a cryptocurrency deposit has occurred.
The Bank of Mexico’s decisions echo the concerns of many regulators and experts alike in the cryptocurrency community. Following a series of large revelations regarding money laundering involving major cryptocurrencies, regulators all around the world have considered how they might be able to regulate the industry in a way that prevents such serious financial crimes from occurring en masse. These regulations fall under the larger category of Know-Your-Customer (KYC) laws, which force institutions to keep closer track of who they are doing business with.
A Concerned Community
The release by the Bank of Mexico was almost immediately confronted with resistance and concerns from several members of the growing cryptocurrency community operating in Mexico. In particular, banks and cryptocurrency exchanges have outlined that they believe the new regulations will adversely affect the efficiency of the market.
The world continues to work to find its footing in the growing cryptocurrency markets. For Mexico, a series of legal and behind-the-scenes discussions will likely help to further develop a largely fluid regulatory approach by the country’s central bank.