Bank of Mexico’s Attempt to Regulate Crypto ‘Is a Disaster,’ Exchange CEO Explains
The long-awaited guidelines on crypto assets recently published by the reserve bank of Mexico have triggered quite a stir. A local cryptocurrency exchange's CEO discusses that “the impact goes beyond the crypto market.” Calling it “a catastrophe,” he asserts that the people within the reserve bank “have really shown their lack of knowledge” about cryptocurrency.
Central Bank Showing Ignorance
Much conversation has actually transpired after the Bank of Mexico (Banxico), the country's reserve bank, published a circular detailing crypto-related arrangements for the regulation of financial technology institutions (FTIs).
Sebastian Acosta Checa, CEO of regional crypto exchange Isbit, showed news.Bitcoin.com that the circular “states FTIs need to avoid consumers from being ‘exposed' to the horrible ‘dangerous' nature of virtual assets on the grounds of their ‘volatility' and ‘intricacy.'” In general, keeping in mind that “In a way, it [Banxico's circular] is preventing organizations from offering virtual assets to end customers,” he remarked:
This is a disaster. The people within Banxico have really shown their ignorance about the subject they are trying to regulate.
Mexico's congress passed a law to regulate fintech business in March of last year, putting Banxico in charge of determining which cryptocurrencies would be authorized to offer to the general public by managed entities. At the time, the crypto community and stakeholders were hopeful that the reserve bank would present favorable regulations to foster the fintech sector and the country's economy as a whole.
Nevertheless, when Banxico finally published the circular, it “essentially stated that they wouldn't authorize any cryptocurrency to be offered by controlled financial business,” stated Tomas Alvarez, CEO of local crypto exchange Volabit.
Restriction But Not Prohibition
Mexican crypto exchange Bitso explained in an article that “the circular is directed at banks and fintech [companies] regarding their operations with cryptocurrencies.” The exchange kept in mind that “Banxico mentions that it looks to take advantage of using the technology of these cryptocurrencies as long as they are utilized for internal operations of financial institutions,” stressing:
This does not mean that operations with cryptocurrencies are prohibited.
Alvarez calls it a catch-22 scenario because the law requires crypto exchanges to end up being regulated financial institutions. “However, as soon as you acquire this license you would not have the authorization to note any cryptocurrencies, making it legally difficult to operate an exchange in Mexico with the fintech law in place,” he noted.
Interpretation of ‘Consumer’
Some of the rules Banxico imposes are not clear, however. Acosta Checa quoted
Since the circular seems to have been written in a rush and without careful analysis and basic competence, it leaves to the interpretation of certain important things.
For example, in his analysis, “financial institutions and foreign trade companies are not a ‘consumer' and thus can operate easily” with his exchange. Isbit has already “moved things to serve companies, corporations and organizations (which are allowed to hold virtual assets in their balance sheets according to the previous bill released March 9, 2018). Therefore we will not close down or lose our most valuable clients,” the CEO emphasized.
Nevertheless, Acosta Checa comprehends that, under the new guidelines, if his exchange wishes to “continue serving final ‘consumers/the public' we will need to appeal the Amparo Law and ask a court to suspend the application of the circular released by the Bank of Mexico (not the entire bill passed by the previous federal government administration on March 9, 2018).”. He clarified:
According to the March 9th bill passed by the [Mexican] congress, we have permission to operate with ‘consumers’ till September.
Damaging the Economy
The CEO of Isbit thinks that the brand-new crypto asset guidelines will adversely affect the country's economy as a whole. He described that “Mexico is the endpoint to the most significant remittance corridor worldwide (second biggest population of migrants), the 6th most visited country by tourists and [is the] country with the biggest variety of free trade contracts.” For that reason, the country “has a lot to gain from the commercial application of virtual assets (activos virtuales) to assist in free trade, tourist and monetary addition,” Acosta Checa detailed, concluding:
The impact goes beyond the crypto industry. I believe it damages the economy as a whole.
What do you think of the rules set by the central bank of Mexico? Let us know in the comments section below.
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