The effect of regulations on the crypto markets has not been noticed on a global scale, but we could learn more about how such actions turn out.
Somewhere in South America, the government of Mexico recently announced that crypto exchanges and banks providing services related to the industry will have to obtain a permit from the Bank of Mexico (Banxico).
This mirrors effort made by the Philippine SEC to bring crypto exchanges under its control, but the latest development in Mexico looks more promising.
For one thing, exchanges that want to get a license would have to provide a detailed business plan complete with a description of their operations. Other data required by the regulators will include the commissions they plan to charge and the mechanism they will use to verify customer identity.
For banks, the circular published by the government requires that customers will not be allowed to engage with crypto on the same day they open an account.
Bank accounts will also have to go through extra validation checks if they’re used for crypto trading while the financial entities that they operate with must identify such customers.
Here’s how strict regulation will lead to a crypto boom in Mexico
Amir Manzur, founder of local crypto exchange, Cubobit already told Forbes in March that the existence of laws for the digital asset industry will strengthen consumer confidence in digital currencies, encouraging people to invest further.
But this is not the only factor that will lead to a cryptocurrency boom in the country.
Hackers would often count on the ignorance of some who are not familiar with cryptocurrencies to dupe them.
Such individuals who would have put their money into crypto through an unsecured means will now have the ability to call on Banxico licensed exchanges for their crypto trading.
Also, new exchanges will find it easier to set up, knowing fully well that they are approved as legal entities. A flock of companies who may be considering where to set up their crypto exchanges may not migrate to Mexico because of the “calm” which has set it.
This will lead to increased crypto activities since more exchanges will be opened to citizens who fear crypto investment simply because the exchanges are operating from another country and not within.
Even though a global regulation for cryptocurrencies may not be on the cards yet, conferring some trust on exchanges will go a long way to attract new investors into the markets.
The government of Mexico has taken a bold step and one that has the potential to affect the industry positively.