Mexico Already Banned A Range Of Cash Purchases, Now Bitcoin Is Included

A recent article by El Universal implied that the taxation arm of the Mexican government, Servicio de Administración Tributaria (SAT), would prohibit bitcoin use due to money laundering concerns. According to a recent post by online blogger Victor Hernández’s, the article released was incorrect. Although changes have been made in the treatment of bitcoin, it is in no way banned.

Bitcoin is now to be regulated under Federal Law on the Prevention and Identification of Operations with Illicit Resources, an anti-money laundering law which was established in 2013.

According to Mónica Ramírez Chimal, founder and partner of Mexico City based consulting firm, ASSERTO RSC, the regulation will affect fifteen activities that are vulnerable to money laundering. “The regulation of these activities[…] is consistent with international standards such as the Financial Action Task Force and the European Union Directives.”

Ex-President of Mexico, Felipe Calderon, signed the regulation into law in an effort to combat transnational crime. “The prevention of money laundering and combating financial terrorism is a fundamental part of the state’s comprehensive strategy against organized crime," he stated at the time.

Mexico is no stranger to money laundering. Mexican drug cartels are responsible for vast amounts of money moving in and out of the country. Award winning Zeta magazine recently reported on the indictment of two men, Ayon Diaz and Contreras Arriaga who have been accused of using multiple “casas de cambio,” currency exchange houses, in Tijuana. Over $45m was laundered between Mexico and United States banks over a two year period, and was tied to the Sinaloa Cartel’s drug trafficking.

“Drug trafficking is a cash business generating an estimated $64 billion annually from U.S. sales. Mexico is the primary source of supply for some drugs and a transit point for others. Although there are no reliable estimates of how much money Mexican drug trafficking organizations earn overall (estimates range from $6 billion to $39 billion), for cocaine, Mexican suppliers are estimated to earn about 14 cents of every dollar spent by retail buyers in the United States.”
— – US National Money Laundering Risk Assesment

The regulation was put in place to tackle these money laundering issues, by placing restrictions on certain transactions using pesos, foreign currency, precious metals and now bitcoin. No on in Mexico can purchase real estate property with a value greater than $500,200 Pesos, US$29,239, with cash or precious metals. The purchase of goods, such as boats, cars, jewelry, art, gambling tickets or the transfer of shares or equity quotas with a value over $200,000 Pesos, US$11,691, is also banned.

“To meet this objective, the Law sets forth rules to identify and notify certain transactions or activities that the Law defines as ‘vulnerable,’ since same could be used by organized crime groups for money laundering or terrorism financing.”
— – Martindale Overview of Mexico’s Anti-Money Laundering Law

Bitcoin related companies are now expected to submit reports on vulnerable activities to the Secretaría de Hacienda y Crédito Público, The Ministry of Finance in Mexico. Under this law, there are obligations to identify clients and users, to retain and safeguard documentation, and to file relevant notices to the Ministry of Finance and to appoint an individual to be in charge of compliance.

The introduction of the this law saw some industries lose income. As reported by the Washington Post, The Morton auction house experienced a 25 to 30 percent drop in sales. According to the auction house director, Luis C. Lopez Morton, customers were afraid to make cash purchases, “They feel uncomfortable. They feel that the government is watching them.”

Whether the application of this regulation will extend to bitcoin companies is yet to be seen. However, there are companies which are moving full steam ahead with incorporating digital currencies into their existing infrastructures.

Most recently MercadoLibre Mexico announced its payment platform MercadoPago has integrated Bitcoin payments. MercadoLibre was founded by Marcos Galperín, employs over 3,000 people, and operates in 12 countries throughout Central and South America.

Should the MercadoLibre experiment with bitcoin be successful, the platform could streamline adoption throughout South America. The platform boasts 90 million users.