The central bank of Mexico has recently proposed a new FinTech law which could serve as a major roadblock for cryptocurrency exchanges to continue their operations. In what is deemed to be a misguided policy by the central bank, it could also lead to banning crypto exchanges in the country.
Over the last year, there’s a considerable rise in the number of stablecoins. Thus, crypto exchanges need to deal more with fiat currencies thereby requiring access to the local banking system. The newly introduced FinTech law impedes access in a major way.
Although the central bank says that it’s not “banning” crypto exchanges, the new law would suffocate crypto exchanges to continue their operations.
No Space for FinTech Innovation
Earlier, the regulatory measures in Mexico’s FinTech industry were expected to open up the doors for innovation and growth. But instead of riding the gap between traditional financial institutions and crypto exchanges, the new laws continue to do the opposite.
The new FinTech law aims to prevent regulated financial institutions from offering any sort of services to crypto-related companies. The FinTech law states that the extremely volatile nature of digital assets along with the “complexity of the mathematical and cryptographic processes that underlie digital assets” and the “difficulty for users to understand these processes,” makes them prevent regulated institutions from having direct contact with crypto.
It also states that cryptocurrencies being backed by complicated technologies, it is beyond the scope for average users to understand their working. Thus, the law states that consumers shouldn’t be allowed exposure to such risky assets.
This looks a bit of an absurd decision preventing even the crypto enthusiasts from participating in the market while taking a generalized stand.
If the new FinTech law is enacted, it would keep away the Mexican citizens isolated from the ongoing FinTech revolution. The law looks quite unwarranted as the regulators can still introduce a framework that protects local investors while letting innovation to flourish simultaneously.
Furthermore, it is more likely that local crypto investor will shift to other global exchanges in other jurisdictions leaving local crypto businesses bankrupt.
The central bank has kept a 60-day window for the local public to put their comments on this proposed rule.