Mexican politicians join the growing club of government regulators wishing to get a handle on bitcoin and financial technology.
Also read: Bank of Mexico Rejects ‘Virtual Currency’ as Legal Classification for Bitcoin.
Sheky Scoops Mexico’s Press
Mexican financial journalists were taken off guard when a Reuters story by Sheky Espejo claimed to have seen pending legislation only whispered about for months.
If government officials have their way, it appears they’re ready to intervene in Mexico’s thriving markets, cryptocurrencies generally, bitcoin in particular, and financial technology (fintech).
Latin America’s second largest economy was rocked recently by a hurricane and a devastating earthquake, the latter of which has probably slowed the pending legislative pace.
Half of Mexico’s population remains un-banked, essentially without recourse to capital and credit.
The draft seen by Mr. Espejo “proposes measures to regulate companies operating with virtual currencies like bitcoin, although it does not provide much detail. The central bank would be tasked with refereeing such operations, the document says.”
Legislation is a response to Mexico’s financial technology boom. More than a few sources believe the country to be the region’s fintech growth leader.
“We went from less than 50 (companies) in 2015,” an anonymous source is quoted, “to 158 in 2016, and we already have over 240 this year.”
The Power of Remittances
Electronic transfers of money, and so the financial technology scaffolding them, regardless of their fiat or commodity status, are lifebloods of the country’s economy.
More Mexican migrants “as a percentage of the total Mexican migrant population are sending money,” noted a report from Leadership for the Americas (LftA).
For the region as a whole, expats sending back money in 2016, the last year for which numbers are known, “surpassed US $70 billion. In the 20 countries for which there is data available, the flow reached US $69 billion,” LftA concluded.
Thirty billion USD of that number is zapped to Mexico, and nearly all of it from migrants in the United States.
That slivers of such lucre go untaxed, unregulated, by government minders is causing grave concern in their ranks.
Proposed threats, the theory goes, by its neighbor to the north’s present executive administration, to tax Mexican remittances specifically, have hastened the search for other avenues of transfer.
While still a relatively small sector of the bitcoin ecosystem, Mexican remittances are enough to rally marketeers ready to supply increasing demand.
Estimates of world remit transfers routinely cite half a trillion USD.
That slivers of such lucre go untaxed, unregulated, by government minders is causing grave concern in their ranks.
Trends seem to suggest a worsening, from their perspective, in this regard.
What is to be Expected
El Financiero (EF), the country’s leading financial newspaper, shed a little more light on what might be in store for fintech.
EF is owned by Grupo Lauman, and is partnered with US financial media giant Bloomberg.
The legacy paper showered praise on the law, explaining, “If approved as it stands, the law could be the most avant-garde in the world by considering different business schemes such as the ‘novel models,’ known as ‘regulatory sandbox.’”
It continues in this vein with the bugaboo common to all bitcoin would-be regulators: frets about money laundering and the ever-consuming protection of users, and how legislation will come to the rescue in both cases.
As of yet, there is no published definition of what is considered money laundering with regard to bitcoin.
Perhaps most ominously, the article ends by assuming “some of the regulated companies will seek to make certain provisions” within the bill. Only time will tell what those provisions might mean.
What do you think? Can bitcoin be tamed? Are governments like Mexico doing the smart thing by making legal room in their economy for cryptocurrencies? Let us know in the comments.
Images courtesy of: Allwaysdive, YouTube, Twitter, LinkedIn. Sterlin Luxan contributed to this article.
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