Why did Mexico remind financial institutions that they couldn’t trade Bitcoin, ETH, or XRP?

Following the restrictions put in place by China, the United Kingdom, and other nations on the use and operation of cryptocurrencies, Mexico has also clarified its stance. The financial authorities made it clear on Tuesday that cryptocurrencies cannot be used within the financial system.

The country’s central bank, Banco de México released a document with the National Banking and Securities Commission reiterating its stance. The Finance Minister of Mexico, Arturo Herrera Gutierrez also shared a post outlining the new ruled.

En los últimos días ha habido mucho interés en torno a las #criptomonedas.

En este comunicado @Hacienda_Mexico, @Banxico y @cnbvmx refrendamos la posición institucional sobre esto. pic.twitter.com/Zasd01lIxS

— Arturo Herrera Gutiérrez (@ArturoHerrera_G) June 28, 2021

This clarification by the authorities followed the news of billionaire Ricardo Salinas Pliego stated that there were plans to make Bitcoin accepted at his bank Banco Azteca.

The central bank may be taking stringent preventive measures to discourage citizens from participating in crypto. The bank not only restricted the use of crypto in the financial system but also warned users about the risks of investing in cryptocurrencies. The country has not classified Bitcoin as an asset class, rather, they deemed it an illegal tender under the current legal framework.

The government may face some troubles in getting people on board with the new rules, as Mexico homes a significant population of crypto enthusiasts. It has been noting a high volume of cross-border transactions using Ripple’s on-demand liquidity [ODL] service. This suggested that cryptocurrencies were being used in the country.

Although Mexico has not yet completely banned crypto, the impact of these new rules was unclear on businesses associated with the field, for instance, cryptocurrency exchanges. Bitso has been a popular cryptocurrency exchange in the country, facilitating ODL transactions. The exchange reportedly has over 2 million users so far, which was large enough to indicate the awareness around virtual currencies.

With restrictions getting stricter, cryptocurrency traders were in a state of panic. The news has not yet impacted the cryptocurrency market but after witnessing the volatility-driven week, it can be said that more bearish volatility may result in higher drawdowns for the entire market.