Regulation
Cryptocurrency Regulation in Mexico 2024
Mexico, nestled in southern North America, is the 13th largest country in the world. It boasts a population of close to 130 million, making it the 10th most populous country. As a developing nation with the world’s 15th largest economy by nominal GDP and 11th largest by PPP, Mexico is emerging on the world stage as a new global economic powerhouse.
But when it comes to cryptocurrency, Mexico has taken a cautious stance. Although the government and the CNBV, an autonomous agency of the Secretariat of Finance and Public Credit of Mexico that oversees and regulates the financial system to ensure stability and protect the public interest, introduced fintech laws in 2018 to establish a regulatory framework, they have a conservative approach to integrating virtual assets into the existing financial system.
Cryptocurrency Regulation in Mexico: A General Overview
Mexico regulates FinTech, such as cryptocurrencies, through the FinTech Law. Although this law establishes the main rules, specific regulations come from various authorities. The National Banking and Securities Commission (CNBV), the Bank of Mexico, and the Ministry of Finance and Public Credit (SHCP) are the main authorities that implement the country’s financial policies, including those related to the FinTech sector.
Virtual assets are defined as electronic values used as payment and transferred electronically. There is no absolute ban on virtual asset transactions, but financial institutions such as banks and Financial Technology Institutions (FTI) require Banxico approval.
Non-financial companies can offer exchange and custody services for visual assets if they do not raise funds or hold clients’ fiat currencies. Lending and yield transactions via DeFi protocols are not recognized under Mexican law.
The Ministry of Finance and Banxio have warned of the risks associated with using virtual assets.
Mexican Cryptocurrency Regulation 2024: What’s New?
February 15, 2024: Bitso is leading the charge in updating cryptocurrency regulations in Mexico. It is proposing changes to tax laws, intellectual property, and the Fintech law.
May 2, 2024: Worldcoin’s expansion into Latin America has raised concerns among Mexican lawmakers, including Maria Eugenia Herandez de Morena.
June 3, 2024: Claudia Sheinbaum of Morena wins presidency. With the ruling Morena party retaining power, the possibility of a sharp departure from the country’s current attitude toward cryptocurrency regulation is limited.
Political Changes in Mexico: Crypto Policy Update Coming?
With Claudia Sheinbaum set to become president of Mexico on October 1, 2024, questions are being raised about potential changes to the country’s cryptocurrency policy. Sheinbaum, a member of the ruling Morena party, closely aligns herself with her predecessor, Andres Manuel Lopez Obrador. The Morena party has not introduced comprehensive cryptocurrency legislation, but it has imposed a 20% tax on cryptocurrency earnings and requires cryptocurrency exchanges to meet global anti-money laundering standards. Despite these measures, the party has maintained a cautious stance on cryptocurrencies.
Cryptocurrency Taxation in Mexico
Mexico does not have specific tax regulations for transactions involving virtual assets. This means that individuals and businesses must comply with general tax laws. The two most important are the Income Tax Law and the Value Added Tax Law. Income tax, up to 35% for individuals and 30% for businesses, is applied to taxable income. VAT, at 16%, is applied to goods and services.
Profits from the sale of virtual assets are treated as sales of goods. Sellers must withhold and make provisional tax payments to the Tax Administration Service (TAS) if transactions exceed $13,324. A provisional tax of 20% is levied on the sale amount. If the buyer is a Mexican resident, the buyer pays this tax; otherwise, the seller is liable. Digital platforms also have specific tax obligations, including income tax withholdings paid directly to the TAS.
Cryptocurrency Mining in Mexico
Mexico does not have specific regulations governing the cryptocurrency mining industry. Mining involves significant energy consumption, and mining operations can be classified as “qualified users” based on their energy consumption. The Electricity Sector Law, implemented by the Ministry of Energy, requires users to comply with consumption level guidelines established by law.
History of Cryptocurrency Laws in Mexico
Mexico introduces Fintech law, establishes regulatory framework for virtual businesses, and updates anti-money laundering law.
The Bank of Mexico publishes Circular 4/2019. The circular prohibits banks and FTIs from dealing directly with virtual assets.
The Financial Intelligence Unit requires non-financial entities engaged in virtual asset transactions in Mexico to comply with the anti-money laundering legal framework.
Banxico Governor Victoria Rodriguez Ceja announces plan to launch digital currency by 2025.
Mexico publishes the National Procedural Code, defining “Blockchain” and “Metaverse” as legal contexts. This action recognizes the evidentiary value of data stored in the blockchain and introduces the idea of a Metaverse for judicial processes.
Final note
In 2018, the Mexican government paved the way for cryptocurrencies with fintech laws, but the country remains cautious about completely embarrassing virtual assets. With Claudia Sheinbaum of the Morena Party now leading as president-elect, not many expect drastic changes in cryptocurrency regulations anytime soon. The focus will likely be on balancing innovation and caution in the evolving digital asset landscape.
Find out also how the laws and regulations influencing blockchain technology and cryptocurrencies, such as Bitcoin, may have repercussions on its adoption.