Mexico proposed new regulatory laws in 2018, set to be implemented this year. Initially aimed to be open and inclusive, the final legislation turned out to be very strict, especially towards cryptocurrencies.

The new fintech law issued by the Bank of Mexico (Banxico) is conflicting with the accelerated growth of fintech activities in the country. According to reports from national media, this regulation may force 201 listed startups to close down.

The law was passed in 2018 but only recently implemented, targeting crowdfunding and electronic payment services. Over 57% of people are actively seeking business permits from the National Banking and Securities Commission (CNBV).

One of the biggest obstacles for entrepreneurs is the high cost of compliance, which can exceed $35,000. The law also requires companies to have a minimum annual profit of $100,000, a goal that many startups cannot achieve.

Entrepreneurs are also constrained by a ban on cryptocurrencies. The latest version of the regulation prohibits fintech companies from exchanging, transmitting, and storing cryptocurrencies.

Cryptocurrency Regulation

According to former Secretary of Finance and former director of a Mexican fintech company, Josu San Martin, there have been significant changes in how Mexican regulatory agencies manage cryptocurrencies since they began regulating them.

San Martin stated:

The barriers were set too high. Initially, their goal was open, inclusive regulation. In the end, the law came with very strict limitations, especially regarding cryptocurrencies, to the point where cryptocurrency exchanges cannot operate under Mexican law.

Meanwhile, blockchain consultant and Chief Marketing Officer of Lumit, Alberto Contreras, mentioned that the high cost of regulation is prompting entrepreneurs to quickly raise funds, with many using ICOs as a means of fundraising.

Bitso's CEO, Gonzalez, said:

Usually, they ask us to create a cryptocurrency first to raise funds, which poses a high legal risk.

The Future of Cryptocurrency in Mexico

Nevertheless, the use of Bitcoin continues to grow. Mexico's largest exchange, Bitso, became the first company in the country to obtain an operating license and now collaborates with nearly 700,000 Bitcoin customers.

According to Pablo Gonzalez, the popularity of cryptocurrencies stems from a widespread distrust of Mexican banks, making his service a necessity.

Here, we have more people using cryptocurrencies than stocks. I think that's why there needs to be fintech laws established in the first place.

Gonzalez said.

Various governments have different attitudes towards cryptocurrencies. In some regions, they can be treated as virtual assets, while in others, they may be seen as tools for criminal activities. Therefore, the regulations vary significantly. However, it is certain that the demand for Bitcoin and its usage are continuously increasing. With more users, governments will have to address this "potential" mainstream currency. In the future, there may be more restrictions on cryptocurrencies, but there will also be better regulatory measures in place.

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