The Bank of Mexico (Banxico) has amended the Rules for the Interbanking Electronic Payment System (Reglas del Sistema de Pagos Electrónicos Interbancarios) in July 2018, with the objective to prevent risks associated with operations with illicit proceeds on the Interbanking Electronic Payment System (SPEI) and cryptocurrency trading platforms (exchanges).

Requirement to identify customers involved in cryptocurrency trading

According to the Banxico Provision number 10/2018 the financial entities authorised to operate in the Interbanking Electronic Payment System (SPEI participants) must comply with the following obligations:

  1. Identify among their clients those subjects (other than financial entities) that exchange or trade cryptocurrency in a regular and professional manner, in terms of article 17 of the Federal Law for the Prevention and Identification of Operations with Illicit Proceeds (Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita (the AML/CFT Law)).
  2. With respect to clients mentioned in (1), only allow them to use demand deposit accounts with a financial entity, and collect from them the identification data referred in article 115 of the Credit Institutions Law (Ley de Instituciones de Crédito).
  3. Refrain from opening any account to the clients mentioned in (1), in order to prevent such clients to offer their users these accounts for electronic fund transfers by SPEI. 
  4. Carry out additional validations regarding fund transfers to beneficiaries of the accounts mentioned in (1).
  5. Have documented policies and procedures regarding the prevention of operations with illicit proceeds that include, at least, the activities that will be carried out to identify the accounts of the beneficiary clients referred to in section (1).
  6. Refrain from making the resources available to the clients in (1) on the same banking business day on which those were received, when Banxico issues a notice regarding a situation in which SPEI participants must enhance their monitoring and alert mechanisms with respect to fund transfers by SPEI.
  7. Refrain from issuing fund transfers in the name of the SPEI participant and on behalf of a third party, payable in any of the client´s accounts mentioned in (1) opened in the same SPEI participant or in any other.

Internal policy for client account identification regarding cryptocurrency trading

Banxico Provision number 11/2018 requires SPEI participants to establish a policy regarding the process for identifying client accounts that exchange and trade cryptocurrencies, according to the AML/CFT Law.

This process must be documented and attached to the authorisation request to Banxico to operate as a SPEI participant. Information regarding the application is defined in the Banxico Provision 14/2017.

Impact on cryptocurrency trading platforms

Banks have raised concerns on how these provisions will affect market efficiency. For instance, financial entities now have to wait for a banking business day to process the fund transfer to the exchange.

Also, exchanges will have to comply with additional regulations making transactions take longer. Similarly, exchanges will have to follow client identification processes that will result in greater transaction costs.

Authorisation to exchange or trade cryptocurrencies

The AML/CFT Law states that the exchange of cryptocurrencies is considered a “Vulnerable Activity” and therefore financial entities or any entity authorized to exchange or trade cryptocurrencies must inform the Ministry of Finance (Secretaría de Hacienda y Crédito Público) of all operations over 645 units (Unidades de Medida y Actualización) which is equal to approximately $2,700 in a single operation or traded through a period of six months.

From 10 September 2019, all financial entities must comply with this disposition.

Also, the AML/CFT Law requires financial entities or any entity authorised to exchange or trade cryptocurrencies to have prior authorisation issued by Banxico in terms of the FinTech Law (Ley de Instituciones de Tecnología Financiera).

The FinTech Law establishes that its secondary regulations must include the authorisation requirements, the terms and conditions for financial entities, FinTechs and exchanges involving cryptocurrency trading, other operations that can be carried out with said assets, the measures for custody and control of the assets, among others.

The FinTech Law established a period of 12 months for Banxico to issue the secondary regulation mentioned above, therefore Banxico has until the end of March 2019 to do so.

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