Key facts:
Eloísa Cadenas, CEO of CryptoFintech, believes that the current law slows down innovation.
Bitcoin taxation should be included in the Fintech Law, said the interviewee.
The Law for Financial Technology Institutions, known as the Fintech Law, enacted in Mexico four years ago, was one of the first regulations that defined the preliminary conditions for the use of bitcoin (BTC) and cryptocurrencies in that country and in the region. .
The purpose of the law is to regulate the services provided by Financial Technology Institutions (ITF), including their organization and operation in Mexican territory. Within these services find cryptocurrency tradingdefined by law under the figure of virtual assets.
However, the regulations also presents obstacles for the development of companies that want to operate with bitcoin, since they must request an authorization from the Central Bank of Mexico (Banxico) and may only use digital assets for internal operations. Therefore, they cannot offer buying and selling services.
Criticism of the Fintech Law
Faced with this scenario, after four years of approval and execution of the law that regulates the Financial Technology industry (Fintech, for its abbreviation in English), several members of the bitcoiner community and specialists who develop blockchain and cryptocurrency projects in Mexico, consider that The regulations have fallen short and a change is necessary.
In this sense, CriptoNoticias spoke with Eloísa Cadenas, CEO of CryptoFintech, a Mexican consulting firm specialized in the development of products with crypto assets and blockchain. The specialist gave first-hand knowledge of her point of view on the current law and whether an adaptation to the new times is necessary.
In his opinion, the legislation is not up to date. Among other things because “there is no Fintech that has the authorization to operate with crypto assets. What the Law says is that, if you want to operate with virtual assets, you must request authorization from the Central Bank of Mexico and it should only be for internal operations, you cannot offer buying and selling services.
Due to the above, Cadenas explained that the alternative that companies in the cryptocurrency sector have chosen is to divide their operation in two. A company that manages the fiat currency and another company that is in charge of crypto assets.
He also expressed that the Fintech Law “has not undergone major changes”, because neither “times have allowed it”. He assures that many companies in the sector, which requested authorization in 2019 to operate in Mexico, they are just getting their license now. “It is a truly exhausting process for those who dare to do it,” Cadenas commented.
The specialist believes that the regulations were made in such a way that “it left out many participants who were operating with crypto assets.” She pointed out that there were companies that had to close their operations because “they couldn’t handle the regulation and they couldn’t continue to capture fiat currency,” she said.
The interviewee believes that the entry of new players in the field of cryptocurrencies is picking up. An example of that was the recent announcement by the Ripio exchange, which I return to Mexico through an alliance with Mercado Pago (a regulated Fintech in Mexico).
“What happens is that the only ways that a company focused on cryptocurrencies can enter Mexico are: creating your Fintech and obtaining an authorization, buying a Fintech, establishing an alliance with a Fintech that allows you to capture Mexican pesos, obviously this last option is the best.
Eloisa Cadenas, CEO of CryptoFintech.
Something that Eloísa Cadenas rescues as positive is that the legislation allows companies in the sector to offer “access ramps”, a service that facilitates the exchange of fiat money for cryptocurrencies.
“Let us not lose sight of the fact that one of the great problems of these companies is the possibility of receiving fiat currency. With a regulated Fintech, they can do it without inconvenience.
Crypto assets for tax purposes
Another aspect that specialists consider, to which special emphasis must be placed, is the tax treatment given to bitcoin and cryptocurrencies.
Vanessa Solis, director of the Vconsulting firm, said that the current law does not express anything related to this area. “Although the Taxpayer Defense Attorney (Prodecon) has issued guidelines in this regard, the fact that the issue is not within the law causes uncertainty,” according to commented to a local newspaper.
Regarding this issue, Cadenas also told CriptoNoticias that in the law “there are no provisions that indicate how crypto assets should be considered for tax purposes.”
Nor does it define what will be the treatment that should be assigned in terms of Income Tax (ISR) and Value Added Tax (VAT) for activities such as mining, purchase, use of cryptocurrencies for the payment of goods or services, exchanges with other assets of the same nature or, even for their own sale or disposal .
In this sense, the Mexican specialist proposes that “particular rules” be issued for the determination of the gain or loss on the sale of digital assets. In principle, Cadenas considers that a treatment regarding ISR and VAT should be defined in the complementary provisions.
Lastly, it proposes to modify the Fiscal Code of the Federation so that it “considers crypto assets in such a way that they comply with minimum international standards and reflect the nature and operational characteristics of cryptocurrencies.”
Platforms that want to comply with the Fintech Law increase
The Fintech Law has led to a greater number of technological platforms dedicated to financial services not related to digital assets, wanting to be covered by the regulations.
Until last June, 139 platforms submitted an application to be authorized. Of these, 90 are Electronic Payment Fund Institutions (IFPE) and 49 Collective Financing Institutions (IFC), which are the two main figures covered by the regulations, reported the Mexican newspaper El Economista.
However, the outlet also assures that the legislation has deficiencies aimed at the type of companies mentioned above, in addition that the regulator does not seem to have the intention of making the necessary modifications.
Mexican regulators choose the CBDC route
So far, Mexican regulators have shown no interest in amending the Fintech Law or creating a specific law for bitcoin and cryptocurrencies. They have preferred to focus more on creating a central bank digital currency (CBDC).
Although there is an exception among legislators, that is the case of Senator Indira Kempis who proposed a regulation for bitcoin to the Mexican parliament, but it is not yet known what will happen to her initiative.
Regarding the CBDC, members of the Central Bank of Mexico have repeatedly reiterated their serious intentions to develop such a digital currency.
The deputy governor of the financial institution, Jonathan Heath, said that the Aztec nation is preparing everything to launch its own digital currency in 2024, as reported by CriptoNoticias.
To move forward with this initiative, private banking was also interested in collaborating. The idea is to develop “a more efficient and robust financial system that reaches Mexicans,” commented the president of the Association of Banks of Mexico (ABM), Daniel Becker.
Both public and some private actors give priority to the development of a CBDC, than to the regulation of bitcoin and other cryptocurrencies. This follows the guidelines of financial organizations such as the Bank for International Settlements (BIS). Despite the fact that days ago, the senator to the federal congress of Mexico, Indira Kempis, introduced a reform that proposes bitcoin as legal tender, framed in the Monetary Law of that country.
On that proposal, Cadenas criticized the senator and considered it an act of “politicking and populism.”