Regulation
Cryptocurrency Regulations in Mexico 2024
Mexico, located in southern North America, is the 13th largest country in the world. Its population is approaching 130 million, making it the 10th most populous country. As a developing country, with the world’s 15th largest economy in terms of nominal GDP and 11th in terms of PPP, Mexico is emerging on the international scene as a new global economic power.
But when it comes to cryptocurrencies, Mexico has taken a cautious stance. Although the government and the CNBV, an autonomous agency of 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 establish a regulatory framework, they have a conservative approach to integrating virtual assets into the existing financial system.
Cryptocurrency Regulation in Mexico: General Overview
Mexico regulates FinTech, such as cryptocurrencies, through the Fintech Law. While 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 responsible for implementing the country’s financial policies, including those related to the FinTech sector.
Virtual assets are defined as electronic values used as a means of payment and transferred electronically. There is no absolute ban on virtual asset transactions, but financial institutions such as banks and financial technology institutions (FTIs) need approval from Banxico.
Non-financial companies can offer visual asset exchange and custody services if they do not participate in fundraising or hold clients’ fiat currencies. Borrowing and yield transactions through DeFi protocols are not recognized by Mexican laws.
The Ministry of Finance and the Central Bank have warned of the risk associated with the use of virtual assets.
Mexican Cryptocurrency Regulations 2024: What’s New?
February 15, 2024: Bitso is leading Mexico’s cryptocurrency regulatory reform, proposing changes to tax laws, intellectual property, and the Fintech law.
May 2, 2024: Worldcoin’s expansion into Latin America is raising concerns among Mexican lawmakers, including Maria Eugenia Herandez de Morena.
June 3, 2024: Claudia Sheinbaum of the Morena party wins the presidency. With the ruling Morena party holding on to power, the chances of a radical change from the country’s current attitude towards cryptocurrency regulation are limited.
Political Change in Mexico: Crypto Policy Update Coming?
As Claudia Sheinbaum is set to become Mexico’s president 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, is closely aligned with her predecessor, Andres Manuel Lopez Obrador. The Morena party has not introduced comprehensive cryptocurrency legislation, but has imposed a 20% tax on cryptocurrency gains and requires cryptocurrency exchanges to comply with global anti-money laundering standards. Despite these measures, the party has maintained a cautious stance on cryptocurrencies.
Taxation of cryptocurrencies in Mexico
Mexico does not have specific tax regulations for transactions involving virtual assets. This means that individuals and companies must comply with general tax laws. The two main ones are the Income Tax Law and the Value Added Tax Law. Income tax, up to 35% for individuals and 30% for companies, applies to taxable income. VAT, at 16%, is levied on goods and services.
Profits from the sale of virtual assets are treated as sales of property. Sellers must withhold and make provisional tax payments to the Tax Administration Service (TAS) if transactions exceed $13,324. A provisional tax of 20% on the sale amount is required. If the buyer is a Mexican resident, they pay this tax; otherwise, the seller is responsible. Digital platforms also have specific tax obligations, including withholding income taxes paid directly to the TAS.
Cryptocurrency Mining in Mexico
Mexico does not have specific regulations governing the cryptocurrency mining sector. 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 set by law.
Timeline of Cryptocurrency Laws in Mexico
Mexico introduces Fintech law, establishes regulatory framework for virtual assets and updates anti-money laundering law.
The Bank of Mexico publishes Circular 4/2019. This 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.
Central Bank Governor Victoria Rodriguez Ceja announces plans to launch a digital currency by 2025.
Mexico publishes the National Code of Procedure, which defines the “blockchain” and the “metaverse” as legal contexts. This measure recognizes the evidentiary value of data stored on the blockchain and introduces the idea of a metaverse for judicial processes.
Endnote
In 2018, the Mexican government paved the way for cryptocurrencies with fintech laws, but the country remains cautious about the embarrassment of virtual assets. With Claudia Sheinbaum of the Morena party now president-elect, few expect drastic changes to cryptocurrency regulation anytime soon. The focus will likely be on balancing innovation and caution in the ever-changing digital asset landscape.
Also find out how the laws and regulations Changes affecting blockchain technology and cryptocurrencies, such as Bitcoin, may impact their adoption.