Mexico says cryptocurrencies are not money, warns of risks

MEXICO CITY (Reuters) – Mexican financial authorities said on Monday that crypto assets are not legal tender in Mexico and are not considered currencies under applicable laws, warning that financial institutions that operate with them are liable to sanctions.

FILE PHOTO: A depiction of Ethereum virtual cryptocurrency is seen among representations of other cryptocurrencies in this illustration photo taken on June 14, 2021. REUTERS / Edgar Su / Illustration

The joint statement by the Bank of Mexico, the Ministry of Finance and the banking regulator comes after Mexican billionaire Ricardo Salinas Pliego said on Sunday that his banking company, Banco Azteca, could start using bitcoin, making it the first country’s bank to start accepting cryptocurrency.

Earlier this month, El Salvador made a dramatic move to make bitcoin legal tender, a world first.

“The financial authorities reiterate their warnings (…) on the risks inherent in the use of so-called” virtual assets “as a medium of exchange, as a store of value or as another form of investment,” the statement said. .

“Financial institutions in the country are not allowed to conduct and offer to the public transactions with virtual assets, such as Bitcoin, Ether, XRP and others in order to maintain a healthy distance between them and the financial system.”

Mexican financial institutions should also avoid passing on to their clients the risks associated with cryptocurrency transactions, the statement said, adding that the use of so-called stablecoins – a form of cryptocurrency typically linked to a traditional currency – n is not allowed under current Mexican law.

Finance Minister Arturo Herrera told a press conference that under current rules it is forbidden to use cryptocurrencies in the Mexican financial system, stressing that the ban is unlikely to change in the short term. term.

Cryptocurrencies tend to be volatile and speculative assets and, although they can be traded, they do not perform the same function as money, “because their acceptance as a means of payment is limited and they do not constitute a good store or a benchmark of value, ”the statement said.

The stern warning was aimed at arresting Salinas Pliego, an ally of President Andres Manuel Lopez Obrador’s MORENA party. The mogul had previously backed a MORENA bill that would have forced the Bank of Mexico to buy foreign cash in a bid to help migrants and tourists repatriate US dollars.

The bill, which largely benefits Azteca, one of the country’s main money transfer processors, was eventually revised, but not before shaking confidence in the country’s financial system, with authorities saying ‘it could force the central bank to add laundered drug money to its reserves.

“It’s a reaction to Salinas Pliego’s comments this weekend. It’s a way of saying his bank can’t accept bitcoins even if he wants to… it’s a way of stopping him, ”said Luis Gonzali, co-director of Franklin Templeton Investments in Mexico.

Reporting by Anthony Esposito and Abraham Gonzalez; Additional reporting by Sharay Angulo; edited by Jonathan Oatis and Aurora Ellis

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