Bitcoin and cryptocurrency trading in Mexico
Mexico’s population has long seen Bitcoin as a fast and cheap means of transferring money in a country where owning a bank account is too expensive for many. Gains from crypto investment are taxed and punishments can be harsh, yet there is no specific tax regulation, meaning crypto gains fall within the standard income tax reporting requirement – or are decided on a case by case basis. Mexico’s government has clear crypto regulations and guidance for banks and virtual asset services providers (VASPs) – which must be registered with its Central Bank, but prefers to keep a somewhat ‘arms length’ approach to crypto. The country has strong figures for crypto ownership and an advanced blockchain business community but drops to 40 through lack of advancement overall within the crypto economy
Mexico is difficult to score as the population are enthusiastic users of crypto to facilitate their economic needs, but the establishment has no strategy for advancing crypto at an institutional level.
Law and crypto trading in MexicoLegal - existing crypto legislation
Mexico is a huge user of crypto, but the concept is used as a tool for many people to gain payment and exchange services – especially in a country with such a high proportion of people who do not have bank accounts. As a result, there are plenty of places to spend and also lots of ATMs, but once again, the majority of the population sees crypto as a fast reliable tool, rather than an investment asset. Bitcoin enthusiasts in Mexico can take advantage of a wide range of available services including most of the well-known international exchanges available locally along with home-based exchanges of which Bitso is one of the most popular.Legal - forthcoming crypto legislation
As Bitcoin’s popularity and acceptance grows, cryptocurrency could fulfill a number of important roles in the country’s keenness to embrace financial technology generally.
Taxing cryptocurrencies in Mexico
Cryptocurrencies, for a long time seen as risky by the Mexican government, are now booming within the country – so much so that taxing it is high up on the Government’s list of priorities. However, there has been huge confusion as to classifying the status of a cryptocurrency – whether they are viewed as an asset or a currency. Also, whether it is used as a means of exchange or as a source of investment for gain – in short, talk it through with a tax expert.
Regulations apply for organisations to operate, but there is no centralised and structured approach to crypto and no detailed and consolidated strategy on how crypto is taxed and regulated. The gains you make as an individual will need to be reported to the Ministry of Finance when a trading transaction is over a certain amount equivalent to $2,500.
As an intangible asset, all transactions involving crypto assets should include value added tax, except in certain situations where some exemptions might apply. Any profit arising from the purchase and sale of crypto assets should be subject to a corporate income tax of 30 per cent. In the case of individuals, depending on their accruable income, they can be subject to income tax of 1.92 per cent to 35 per cent, or even be exempt in some cases.
Tax when moving residency
If you are a long-term resident of Mexico you are probably deemed a permanent resident for tax purposes. However, there is no legal restriction for a Mexican citizen or resident to participate in foreign exchanges outside Mexico. Consequently, the foreign exchange does not necessarily have to comply with Mexican laws just because they have a Mexican user. If you are not a permanent resident, and your holdings are outside of Mexico you’ll fall under the required tax laws of your adopted country.
Tax on mining
Once again, gains you make from mining are subject to tax, but as explained previously, Mexico has yet to develop a cohesive taxation strategy for crypto so you’ll be dealt with on a case-by-case basis. You’re more likely need to make provision for your use of energy, subject to the energy legal framework.
Crypto financial services in Mexico
Most retirement and pension funds worldwide deem cryptocurrencies to be too volatile to become part of long-term retirement schemes. There is little certainty on this at present.
Crypto and digital currencies are a welcome innovation to Mexico’s large populations, many of whom do not have bank accounts. Mexico’s traditional financial services, loans and credit cards etc., are viewed as expensive when compared to setting up a crypto account and the banking establishment is looking at how to tap into this marketplace.
Mexico’s banking and insurance sector recognises how FinTech businesses can attract a significant number of customers and have started developing innovative solutions as well as forming various types of partnerships with companies in this field.
Using crypto in Mexico
If you’re feeling generous you can gift your crypto and there isn’t a specific tax implication on doing so.
Crypto regulation in Mexico
As always it pays to do some research into the exchanges and how much support and protection they offer – or if they are insurance against unforeseen problems. In all cases you need to make a clear record of your dealings. Home-based securities may be able to provide more customer support but you need to check. There are strict fintech licensing requirements and crypto firms must report transactions over a certain amount, but tax issues have not been firmly pinned down in crypto activities and appear to be dealt with on a case-by-case basis.
Cryptocurrencies in Mexico have a wider user base, but there is no regulated market environment or designated authority to control the taxation of income from cryptocurrencies.You’ll have to disclose ID and details when opening an account with any exchange.