Non-profit cryptocurrency research and advocacy group Coin Center has sounded the alarm on a series of harsh regulations proposed by the central bank of Mexico, the Banco de México, that would enact a de facto ban on cryptocurrency exchanges operating in the country.
In an op-ed co-authored by Coin Center’s executive director Jerry Brito and director of research Peter Van Valkenburgh, the duo ripped the proposed rules as draconian and said the central bank was betraying the crux of recently-passed domestic fintech legislation to commit a crypto exchange crackdown:
“Cryptocurrency exchanges dealing in fiat currency need access to the local banking system. Under the new law, that access will be severely impeded. While the central bank can claim that they are not ‘banning’ exchanges, the effect will be the same.
As originally envisioned, the new fintech law should have opened Mexico for innovation by not only allowing cryptocurrency exchanges to continue operating but also to provide them a reasonable path to better regulation as full-fledged financial institutions. The central bank, however, has now proposed to do the opposite, closing the door on these promising new technologies by prohibiting any regulated financial institution from offering cryptocurrency exchange, transmission, or custody services to customers.”
A big deal for crypto in Mexico.
As you can imagine, we are strongly opposed. https://t.co/5E6wtU6QvD
— Neeraj K Agrawal (@NeerajKA) March 21, 2019
The Central Bank’s Pretexts
The Banco de México said new rules were called for because cryptocurrencies are complex, volatile, and capable of facilitating illegal transactions.
Brito and Van Valkenburgh blasted the idea that crypto exchanges should be constricted because the crypto ecosystem is complicated, as they argued that vehicles and the internet aren’t banned even though average users don’t understand the technical intricacies of how these mainstream technologies work.
The duo also said that, if enacted, the rules would only put Mexican users at risk because it would deny them the fruitfulness of domestic cryptocurrency innovation while doing nothing to directly block their access to crypto via the internet.
Coin Center concluded their op-ed in calling for the public to join them in filing comments against the proposed regulations, with the rules having entered a two month consideration period.
More Harshness on the Horizon?
The Mexican central bank’s proposed rules are a step in the direction of the recent projection of Coin Metric’s Nic Carter, who said earlier this month that a Western government would likely “criminalize Bitcoin ownership” at some point over the next year.
Prediction: in the next 12 months, a high-profile western government will criminalize Bitcoin ownership. Justifications will include:
– Terrorist financing
– Owned by regimes like NK and Maduro
– Darknet markets— nic ???? carter (@nic__carter) March 14, 2019
Carter’s posited reasonings coincide with the Banco de México’s rather extreme concerns over illegal crypto transactions. He predicted that the “first stage” of such a crackdown would entail “heavy regulation” of cryptocurrency exchanges.
The first stage will be heavy regulation: all owners must self identify, exchanges must HEAVILY surveil users, mining requires a permit, etc
— nic ???? carter (@nic__carter) March 14, 2019
Yet even with these extreme possibilities, other countries are taking opposite approaches.
Other Central Banks Are More Open-Minded
Though Mexico’s central bank is considerably larger, the Eastern Caribbean Central Bank (ECCB) is moving forward on a blockchain pilot project as of this month. The deal will see the bank collaborating with fintech play Bitt to release a crypto version of the Eastern Caribbean dollar (XCD).
Moreover, the Central Bank of Curaçao and Sint Maarten also revealed last fall that it had begun developing a pilot for a central bank cryptocurrency. Cedric Pietersz, the bank’s Treasurer, noted at the time that the institution was taking decisive steps to embrace crypto tech:
“It is important to us to understand the technology so that we can engage in the best discussions, or participate appropriately when we are discussing about those new innovations on the island, such as a central bank digital currency, Initial Coin Offerings, and so forth.”
So while Mexico’s national bank may be in the midst of a de facto crypto crackdown, other smaller central bank institutions are embracing the tech in earnest. Larger ones may follow yet.
