Between January and May, Mexico's Financial Intelligence Unit (UIF) recorded a significant increase in the number of alerts to prevent money laundering with virtual assets or cryptocurrencies, reaching a total of 607,404 alerts. This is a 113% year-on-year increase, compared to the same period last year. And it is more than 100 times compared to 2022which reveals both the growth of adoption in the Central American country and the increased concern about regulations. Since the enactment of the Fintech Law in 2020In Mexico, cryptocurrency exchanges and other virtual asset providers must register as an activity under the Federal Law for the Prevention and Identification of Operations with Illicit Proceeds. The regulations establish the obligation to generate notices to the UIF, through the Tax Administration Service (SAT), when operations exceed the threshold of 645 Measurement and Update Units. It is a sum that at current values represents 70,111 Mexican pesos, that is, almost 4 thousand dollars. Now, in the industry they attribute the increase in suspicious reports in part to the impact of the fall of the FTX exchangeamong other relevant events in the cryptocurrency ecosystem. This was stated by Isaac Lopeza partner in the Blockchain and Crypto division of the firm Legal & Compliance Advisors, who assessed the effects of the company's bankruptcy after incurring a debt of 9 billion dollars.
“Mexico continues to be in the top three Latin American countries for cryptocurrency adoption. The increase in notifications to the UIF is due to the fact that many companies, seeing what happened with the collapse of FTX, opt for self-regulation and have no other mechanism in Mexico, other than the anti-money laundering registry, to convey security to their users.” Isaac López, partner at the firm Legal & Compliance Advisors.
Therefore, the data is not necessarily negative. As of last March, 53 companies and institutions were authorized to register with the SAT, compared to a total of 135 applications received since 2020. According to López, in the newspaper El Economista, in recent times there has been “a consolidation of the crypto market in Mexico” which, when applying the regulations, “increases the number of notices.”
The head of Mexico's UIF, Pablo Gómez Álvarez, with AMLO. Source: Cuartooscuro/Presidency
“Stifling regulation”
Despite the progress in the regulation of cryptocurrencies in different parts of the world, the Bank of Mexico and the Ministry of Finance and Public Credit maintain the position of keeping these instruments away from the financial system. As BitcoinDynamic reported, there are governments that accepted banks to guard cryptocurrencies. In Mexico, traditional institutions cannot offer digital assets, and non-financial providers are only subject to anti-money laundering regulations. In other countries in the region, such as Argentina, exchanges and this type of service providers are also within the area of supervision of the anti-money laundering agency. This last requirement was approved in March of this year, after a law was updated in Congress in line with the recommendations of the Financial Action Task Force (FATF)) and its regional section. This type of legislation is one of the first actions implemented by states in regulatory matters, given the concern that bitcoins and other decentralized assets are being used to finance organized crime. The Financial Action Task Force of Latin America (GAFILAT) recognized Mexico's efforts in this regard. In this regard, the Financial Crimes Enforcement Network (FinCEN) This year, the US Department of Finance insisted that illegal fentanyl trafficking and its production is linked to the use of cryptocurrencies. This is a controversial observation, as other agencies, such as the DEA, highlight the preference of drug trafficking for cash. In the context of this regulatory debate, in Mexico there are demands to update the regulations. In August of last year, during an event, Mexico's Undersecretary of Finance, Gabriel Yoriohe was honest: What are we going to do with cryptoassets? Either we ban them or we regulate them. But we have to make a decision now.” For the moment, there is still a long way to go before legislation is approved by the industry. “There is a regulatory party (for cryptocurrencies) abroad and Mexico is not at that party due to a stifling regulation that creates uncertainty«, Lopez lamented.