Mexico, located in southern North America, is the thirteenth-largest country in the world by area. Its population is about 130 million, making it the tenth-most populous country. As a developing country with the fifteenth-largest economy in the world by nominal GDP and the eleventh-largest by purchasing power parity, Mexico is emerging on the world stage as a new global economic power.
But when it comes to cryptocurrencies, Mexico has taken a cautious stance. Although the government and the National Bank of Mexico, an independent agency under Mexico’s Secretariat of Finance and Public Credit that oversees and regulates the financial system to ensure stability and protect the public interest, introduced fintech laws in 2018 to create a regulatory framework, they are taking a conservative approach to integrating virtual assets into the existing financial system.
Mexican Cryptocurrency Regulation: An Overview
Mexico regulates the fintech sector, such as cryptocurrencies, through the Fintech Law. While this law sets the main rules, specific regulations come from different 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 that are used as means of payment and are transferred electronically. There is no explicit prohibition on transactions in virtual assets, but financial institutions such as banks and fintechs need approval from the Bank of Mexico.
Non-financial companies can provide exchange and custody services for virtual assets if they do not participate in fundraising or holding fiat currencies for clients. Borrowing and yield transactions through DeFi protocols are not recognized under Mexican law.
The Ministry of Finance and Xiu Bank have warned of the risks of using virtual assets.
Mexican Cryptocurrency Regulation 2024: What’s New?
February 15, 2024: Bitso takes the lead in updating crypto regulations in Mexico. It proposes changes to financial laws, intellectual property laws, and the FinTech law.
May 2, 2024: Worldcoin’s expansion into Latin America raises concerns among Mexican lawmakers, including Maria Eugenia Hernandez of Morena.
June 3, 2024: Claudia Sheinbaum of the Morena party wins the presidency. With the ruling Morena party in power, the scope for a sharp departure from the country’s current stance on cryptocurrency regulation is limited.
Political Change in Mexico: Is There an Update to Encryption Policy in the Future?
With Claudia Sheinbaum set to take office as Mexico’s president on October 1, 2024, questions are being raised about potential shifts in the country’s crypto policy. Sheinbaum, a member of the ruling Morena party, is closely aligned with her predecessor, Andres Manuel Lopez Obrador. Morena has not introduced comprehensive crypto legislation but has imposed a 20% tax on crypto gains and required crypto exchanges to meet global anti-money laundering standards. Despite these measures, the party has maintained a cautious stance on crypto.
Taxes on cryptocurrencies in Mexico
Mexico does not have specific tax rules for transactions involving virtual assets. This means that individuals and businesses must comply with general tax laws. The important laws are the Income Tax Law and the Value Added Tax Law. Income tax, which is 35% for individuals and 30% for businesses, applies to taxable income. A 16% VAT is levied on goods and services.
Profits from the sale of virtual assets are treated as sales of goods. Sellers are required to withhold and pay provisional taxes to the Tax Administration Service (TAS) if transactions exceed $13,324. A provisional tax of 20% is required on the sale amount. If the buyer is a resident of Mexico, the buyer pays this tax; otherwise, the seller is responsible. Digital platforms also have specific tax obligations, including withholding income tax paid directly to the Tax Administration Service (TAS).
Crypto Mining in Mexico
There are no specific regulations governing the cryptocurrency mining industry in Mexico. Mining requires significant energy consumption, and mining operations may be classified as “qualified users” based on their energy consumption. The Electricity Industry Law, enforced by the Ministry of Energy, requires users to comply with consumption level guidelines set by law.
Timeline of Crypto Laws in Mexico
Mexico passes fintech law, creates regulatory framework for virtual assets, updates anti-money laundering law.
The Bank of Mexico issued Circular No. 4/2019. The circular prohibits banks and financial investment institutions from directly dealing with virtual assets.
The Financial Intelligence Unit requires non-financial entities involved in virtual asset transactions within Mexico to comply with the anti-money laundering legal framework.
Bank of Mexico Governor Victoria Rodriguez Ceja has announced a plan to launch a digital currency by 2025.
Mexico publishes a national procedural law that defines “blockchain” and “virtual world” as legal contexts. This measure recognizes the evidentiary value of data stored on blockchain and introduces the idea of virtual worlds to judicial proceedings.
Closing note
In 2018, Mexico’s government paved the way for cryptocurrencies with fintech laws, but the country remains cautious about fully embarrassing virtual assets. With Morena’s Claudia Sheinbaum taking office as president-elect, few expect any radical shifts in crypto regulations right away. The focus is likely to be on balancing innovation with caution in the evolving digital asset landscape.
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