As the popularity of cryptocurrencies has risen across the world, many governments have taken measures to safeguard their citizens. One such example can be seen in Mexico, where the government recently instituted new KYC regulations that are set to go into place beginning in September 2019. However, many critics disagree with the laws and are pushing hard for Mexican lawmakers to reconsider.
A Reduction In Accessibility
One of the most significant changes set in place under the new law is how difficult it now is for consumers to make direct crypto transactions. The new law stipulates that only a handful of companies will be permitted to use crypto assets for internal transferring purposes. The Mexican Central Bank, Banxico, further clarifies that these companies should not offer cryptocurrencies to final consumers.
How Can The Government Enforce This Measure?
There are a few ways that Banxico seeks to cut back on their citizen’s accessibility to cryptocurrency. Essentially, it involves going through a significant amount of red tape. If companies wish to work with cryptocurrencies, they are first going to need to secure dozens of licenses and permits. Companies are also going to need to provide other information, including:
• Company profiles
• Financial statements
• Business plans
Perhaps the most significant change, however, is the fact that companies must now meet Know Your Customer regulations. The government says that these measures are in place to help cut down on money-laundering efforts and to ensure that companies are engaged in an authorized legalized activity when dealing with cryptocurrencies.
Even though Banxico worked hard to put these measures in place, there’s nothing stopping citizens from participating in foreign cryptocurrency exchanges. However, if they wish to do so, they may find that they’ll need to meet many of the same requirements.
For instance, many crypto exchanges require some form of KYC or two-factor authentication. The difference, however, boils down to accessibility. The Mexican government seeks to limit availability to licensed companies, meaning that the average person will not have access. If the average person wants access, they’ll likely need to participate in a foreign exchange.
Why Did These Measures Go Into Place?
The short answer is to prevent the use of cryptocurrency exchanges for money laundering. Over the past few years, money laundering has grown into a more significant problem across the world. Other countries, such as the United States and European Union, have passed legislation that not only addresses the use of cryptocurrencies but also seeks to cut down on money-laundering efforts.
Many countries around the world have implemented more rigid KYC programs. It appears that the Mexican government was attempting to follow suit when passing this law. When critics of the law began speaking out, Banxico came out and said that the reason for adopting the new regulations was because of how complex and volatile the cryptocurrency marketplace can be and because the industry has a track record of supporting illegal activity.
Essentially, the passing of these new regulations demonstrates that, for Banxico, the risks of cryptocurrency far outweigh the benefits. The bank also made clear that they believe cryptocurrencies are far too complicated for the everyday consumer.
What Do Critics Have To Say?
As mentioned, many people are unhappy with the new financial regulations that Banxico put in place. Many financial institutions that the KYC regulations are going to slow down the speed of transactions considerably while driving up costs. Another critic likened the rules to driving a car. People don’t understand how a car works, and yet they are still allowed to drive them every day. Why then are people not allowed to participate in cryptocurrencies?
Implementing KYC Regulatory Requirements
If financial institutions are worried about achieving the KYC regulatory requirements, they should not fear. Today’s technology now makes it easier than ever to fulfill KYC regulatory requirements.
One such example of how far KYC accessibility has come is by looking at the ability to scan and view IDs. Today’s smartphone cameras often come with dual lenses. Although these lenses are excellent for taking beautiful “Portrait Mode” camera shots, they also make it easy to scan a holographic ID.
Imagine a financial institution needs to verify the identity of the person on the other end of the transaction. The financial institution could send that individual a secure link, which they would open on their phone. Then, they would scan their ID, and the financial institution would confirm the identity of the individual.
The premise that KYC regulation is a slow, tedious process is an outdated line of thinking. Today’s technology grants companies with access to safe, effective KYC that allows them to meet the regulations set forth by their respective governments. If companies are interested in working with cryptocurrencies in Mexico, they should rest assured that the likelihood of KYC compliance is much more likely than they anticipate.