Mexico Cryptocurrency Regulations in 2024

Mexico, located in the southern part of 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 15th largest economy in the world by nominal GDP and 11th by PPP, Mexico is emerging on the world stage as a new global economic powerhouse.

However, Mexico has taken a cautious stance when it comes to cryptocurrency. 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 financial technology legislation in 2018 to establish a regulatory framework, they have taken a conservative approach to integrating virtual assets into the existing financial system.

Mexican Cryptocurrency Regulation: General Overview

Mexico regulates FinTech, like cryptocurrencies, through the FinTech Law. While this law sets the main principles, the detailed regulations come from different bodies. The National Banking and Securities Commission (CNBV), the Bank of Mexico, and the Ministry of Finance and Public Credit (SHCP) are the main bodies implementing 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 total ban on transactions in virtual assets, but financial institutions such as banks and financial technology institutions (FTIs) need Banxico’s approval.

Non-financial companies can offer exchange and custody services for visual assets if they do not engage in fundraising or hold fiat currencies of customers. Lending and income transactions via DeFi protocols are not recognized under Mexican law.

Ministry of Finance and Banxio warn about the risks associated with using virtual assets.

Mexican Cryptocurrency Regulations 2024: What’s New?

February 15, 2024: Bitso is leading the way in updating Mexican cryptocurrency laws. It is proposing changes to tax law, intellectual property law, and fintech law.

May 2, 2024: Worldcoin’s expansion into Latin America is raising concerns among Mexican lawmakers, including Maria Eugenia Herandez of Morena.

June 3, 2024: Claudia Sheinbaum of Morena wins presidential election. With the ruling Morena Party holding on to power, the chance of a sharp shift away from the country’s current approach to cryptocurrency regulation is limited.

Political Changes in Mexico: Are We in for an Update to Our Cryptocurrency Policy?

With Claudia Sheinbaum set to become Mexico’s president on Oct. 1, 2024, questions are being raised about potential changes to the country’s cryptocurrency policy. Sheinbaum, a member of the ruling Morena party, has been closely aligned with her predecessor, Andres Manuel Lopez Obrador. The Morena party has not introduced comprehensive cryptocurrency regulations, but has imposed a 20% tax on cryptocurrency profits and requires cryptocurrency exchanges to meet global anti-money laundering standards. Despite these measures, the party has maintained a cautious stance on cryptocurrencies.

Mexican Taxation of Cryptocurrencies

There are no specific tax laws in Mexico for transactions involving virtual assets. This means that individuals and companies must comply with general tax laws. The two most important are the tax law and the value added tax law. Income tax, up to 35% for individuals and 30% for companies, is applied to taxable income. VAT, at 16%, is charged on goods and services.

Gains from the sale of virtual assets are treated as sales of goods. Sellers must withhold and make interim tax payments to the Tax Administration Service (TAS) if transactions exceed $13,324. A 20% interim tax 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 certain tax obligations, including income tax withholdings paid directly to the TAS.

Cryptocurrency mining in Mexico

There are no specific regulations governing the cryptocurrency mining sector in Mexico. Mining involves significant energy consumption, and mining operations can be classified as “Qualified Users” based on their energy consumption. The Electricity Industry Law, implemented by the Ministry of Energy, requires users to comply with consumption guidelines set forth in the law.

Mexico Cryptocurrency Regulation Timeline

Mexico introduces Fintech law, establishes regulatory framework for virtual assets and updates anti-money laundering law

Bank of Mexico publishes Circular 4/2019. The Circular prohibits banks and FTIs from directly dealing with virtual assets.

The Financial Intelligence Unit requires non-financial entities involved in virtual asset transactions in Mexico to comply with the anti-money laundering legal framework.

National Bank Governor Victoria Rodriguez Ceja announces plan to launch digital currency by 2025.

Mexico publishes National Procedure Code, defining “Blockchain” and “Metaverse” as legal contexts. This action recognizes the evidentiary value of data stored on the blockchain and introduces the idea of ​​the Metaverse for lawsuits.

Endnote

In 2018, the Mexican government set the stage for cryptocurrencies with financial technology regulations, but the country remains wary of the downright embarrassing virtual asset. With Morena’s Claudia Sheinbaum at the helm as president-elect, few expect drastic changes to cryptocurrency regulations anytime soon. The focus will likely be on balancing innovation with caution in the changing landscape of digital assets.

Also learn how laws and regulations surrounding blockchain technology and cryptocurrencies like Bitcoin could impact their adoption.