Mexican Bill Centralizes Cryptocurrency Regulation Under Central Bank

The Mexican government has become the latest state to attempt to regulate cryptocurrencies, with a new bill that proposes to centralize responsibility for cryptocurrency startups and other fintech companies.

The new bill, which seeks to introduce a raft of legislation surrounding the fintech and cryptocurrency sectors, would hold the Mexican central bank responsible for regulatory oversight of startups, while clarifying the legal status of cryptocurrencies like bitcoin.

Notably, the legislation will distinguish bitcoin from other currencies, and clarify that the digital currency is not in fact legal tender in Mexico. But arguably the most important development for companies in the sector is in the transition of regulatory power to the Bank of Mexico.

According to an English translation of the draft bill, prior authorization from the central bank would be required by any firms looking to operate in the space.

“(Firms) can only operate with virtual assets that are determined by the Bank of Mexico through general provisions. To carry out operations with such virtual assets, they must have the prior authorization of the Bank of Mexico.”

The Mexican fintech bill has been widely discussed since its first draft was made public in the spring. Among the most contentious provisions were rules around “institutions dedicated to the purchase and sale of virtual assets,” although these have now been omitted as the draft nears its final stages.

Mexican President Enrique Pena Nieto has intimated that the legislation will be presented this week, where it will initially be scrutinized by an independent commission. Following approval, the bill will be passed to the Senate for further scrutiny, and potentially amendment en route to its passing into law.

The governor of the Bank of Mexico, Agustin Carstens, has previously suggested that until cryptocurrencies such as bitcoin are regulated by the central bank or by government, they will lack the fundamental characteristics of a currency.

At a presentation delivered in August, Carstens continued, suggesting that innovation in the financial sector must be paired with new regulations and structures in order to be viable.

The Mexican bill represents the latest attempt by governments and central banks to get to grips with emerging technologies in the cryptocurrency space.

While others are still considering their approach, it remains to be seen whether and how the Mexican law will work in practice in its current form.