A new Fintech Law issued by the Bank of Mexico (Banxico) clashes with the accelerated growth of fintech activity in the country. The resulting crackdown could force the closure of 201 listed startups, according to national media.

The law, passed in 2018 but only recently enforced, targets crowdfunding and electronic payments services. Over 57% of them are currently battling against time to obtain permission to do business from the National Banking and Securities Commission (CNBV).

One of the biggest barriers for entrepreneurs are the high costs required for compliance, which can reach well over $35,000. The law also demands businesses to have a minimum annual profit of $100,000, some thing few startups can achieve.

The entrepreneurs are also subject to a cryptocurrency ban. A recent version of the regulation banned fintechs from exchanging, transmitting, and holding crypto.

The Struggle With Crypto

Mexico’s regulators’ initial attempts at managing cryptocurrencies have changed drastically since it began the regulation process, according to Josu San Martin, Ex-Director at the Secretary of Finance and Former Director of Fintech México.

“The bar was set too high. At first they were aiming for an open, inclusive regulation. At the end, the law came out very restrictive, especially for cryptocurrencies to the point where an exchange can’t work under the Mexican law,” San Martin said.

At the same time, the high costs of regulation pushed entrepreneurs to raise funds quickly, with many of them resorting to ICOs, according to Alberto Navarro, CCO of Lumit, a blockchain consultant.

“Usually the first thing they ask us for is to create a cryptocurrency to raise funds with, which comes with a very high legal risk,” Contreras said.

Moving Forward

Nonetheless, bitcoin adoption isn’t slowing down. Bitso, Mexico’s biggest exchange, became the first to obtain a license to operate in the country and now works with nearly 700,000 bitcoin customers.

According to Pablo Gonzalez, Bitso Chairman and Co-Founder, the popularity of cryptocurrencies stems from the general distrust of banks in Mexico, making his service a necessity.

“Here we have more people using cryptocurrencies than equities. I think that’s why a Fintech Law was created in the first place,” Gonzalez said.

Disclaimer Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.