Mexico says cryptocurrencies are not money, warns of risks

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

June 28, 2021

By Anthony Esposito and Abraham Gonzalez

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

The joint statement by the Bank of Mexico, finance ministry and banking regulator comes after Mexican billionaire Ricardo Salinas Pliego on Sunday said his banking business, Banco Azteca, may begin using bitcoin, which would make it the country’s first bank to start accepting the cryptocurrency.

Earlier this month, El Salvador made a dramatic move to make bitcoin a 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 means of exchange, as a store of value or as another form of investment,” the statement said.

“The country’s financial institutions are not authorized to carry out and offer to the public operations 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 must also avoid transmitting to their clients the risks associated with cryptocurrency operations, the statement said, adding that the use of so-called stablecoins – a form of cryptocurrency usually pegged to a traditional currency – was not permitted under current Mexican law.

Finance minister Arturo Herrera said at a news conference that under current rules cryptocurrencies are prohibited from being used in the Mexican financial system, underscoring that the prohibition will likely not change in the near term.

Cryptocurrencies tend to be volatile and speculative assets and while they can be traded, they do not serve the same function as money, “since their acceptance as a means of payment is limited and they are not a good reserve or value reference,” said the statement.

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