Legal analysis on the operation of Cryptocurrency ATMs in Mexico

FINANCE AND BANKING / by Miguel Gallardo Guerra

This legal opinion briefly addresses the specific regulation applicable in Mexican territory regarding the operation of Bitcoin or cryptocurrency automated teller machines (ATMs) under the legislation and restrictions. We present the following analysis and opinion for consideration. It covers the scope and legal grounds applicable to the case and recommendations related to this type of business.

Background

Mexico is one of the first countries in the world to have Fintech regulation. It recognized the potential of this ecosystem in March 2018 when it enacted the Financial Technology Institutions Law (Fintech Law), which defines cryptocurrencies as virtual assets.

Although the law recognizes virtual assets, there are increasingly many companies whose primary purpose is operating and trading cryptocurrencies, which are defined as virtual assets in the Fintech provisions. In Mexico, Bitcoin (BTC) ATMs have been available since 2013, when the first one began operating. The introduction of the Fintech Law has made significant adjustments, but this activity remains viable in Mexican territory.

Applicable legislation

Several legal provisions regulate the operation of virtual assets in Mexico, as follows are the main articles and related provisions:

1. Financial Technology Institutions Law (Fintech Law)
   Defines virtual assets and the entities authorized to operate them:
   • Article 30: A virtual asset is a representation of value recorded electronically and used among the public as a means of payment. Financial Technology Institutions (hereinafter, “FTI”) may only operate with virtual assets authorized by Banco de México (hereinafter” Banxico”).
   • Article 88: Credit institutions may operate with virtual assets with prior authorization from Banxico, subject to its general provisions.
2. Banxico’s secondary regulation (Circular 4/2019)
   Establishes that institutions may only conduct internal operations with virtual assets, with prior authorization from Banxico, and must prevent the risk of these operations from affecting clients.
3. Federal Law on the Prevention and Identification of Transactions with Illegally-Obtained Funds (Anti-Money Laundering Law)
   Recognized as a vulnerable activity, the professional offer of virtual asset exchange by non-financial institutions, including the sales, custody, or transfer of virtual assets.

Analysis

Analysis

There is no specific regulation for Bitcoin ATMs in Mexico, but obligations and provisions exist to address this. Operating Bitcoin ATMs in Mexico involves:

1. Exchange between cryptocurrencies
   • Requirements:
     • Incorporation of a Mexican company or branch.
     • Focus on ATM security and installation.
     • Contracts with internet, maintenance, and security providers.
     • Privacy notice if personal data is collected.
     • Agreement with a local or foreign exchange.

2. Cryptocurrency trading operations with money.

• Additional requirements:
  • Registration of vulnerable activities before the SAT.
  • Notice to the tax authority if the transaction equals or exceeds $58,253 MXN.
  • Agreement with a financial institution for money management.

Conclusion

• It is possible to operate Bitcoin ATMs in Mexico through a Mexican company or branch.
• A specific license is not required, but the recommendations and notices of the tax authority must be followed.
• The main activities will be the exchange of cryptocurrencies and the collection and delivery of money, which requires agreements with an exchange and a Mexican financial institution.

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