A few months ago, the non-profit crypto advocacy group, Coin Center, sounded the alarm on blockchain regulation in Mexico. At the start of the year, Malaysia took a similar stance on blockchain companies. This could be the start of tough times for cryptocurrency exchanges and blockchain companies, not just in Malaysia and Mexico, but the world over.
Don’t Let The Positive Attitude Toward Crypto Fool You
Cryptocurrency exchanges need access to local banks since they deal in fiat currency too. However, this puts crypto exchanges within the cross-hairs of central banks, which can impede their access to funds. At the moment, most banking regulators claim not to have intentions of banning crypto exchanges. However, the effect of blocking their access to banks is more or less the same.
Mexico’s FinTech laws originally envisioned opening Mexico’s financial landscape for technological innovation. As a result, blockchain companies now had a clear framework by which they could continue to operate under reasonable stipulation provided for by the law. As such, crypto exchanges could serve as fully-fledged financial institutions.
On the contrary, the Central Bank of Mexico shut the door on promising blockchain technologies by prohibiting regulated banks from offering custodial services. At the time, the regulator explained its actions, citing the complexity, volatility, and potential of use in criminal enterprises.
Setting the Pretext for Central Banks Around the World
The idea that cryptocurrency exchanges should be forced into constriction due to the complexity of blockchain networks is blatantly absurd. Why hasn’t the government banned the use of smartphones since the average user does not know the technical intricacies of how smartphones operate?
Furthermore, such hostile blockchain regulation would only place users in Mexico at risk of missing out of the fruits of domestic blockchain innovation. Also, they do nothing to block the public’s access to the blockchain services via the internet. I project that more western powers will most likely criminalize the ownership and trading of bitcoin in the future.
At the moment, what would have been the first stage of the crackdown is already in play. The heavy regulation of crypto-exchanges is just the first step toward the criminalization of cryptocurrencies.
The Sharp Contrast in Approaches to Blockchain Regulation and Application
Indeed, blockchain technology has extreme potential. Hence, the positive approach by nations will last for as long as they haven’t realized that control over monetary policy is slipping away. On the one hand, the considerably large central banks are moving forward with crypto hostility. On the other hand, the smaller central banks are launching blockchain pilot projects.
For instance, the Central Bank of Curaçao and Sint Maarten is still on track in developing a central bank-backed cryptocurrency. The more significant less open-minded regulators show no signs of following.