Retail cryptocurrency trading is legal and regulated in Mexico under a dual framework established by the 2018 Fintech Law and subsequent central bank circulars. While the primary financial regulator, Banco de México (Banxico), explicitly prohibits regulated financial institutions (banks and licensed fintechs) from offering virtual assets directly to the public to maintain a 'healthy distance,' retail trading is permitted through non-financial entities. These crypto-service providers must register with the Tax Administration Service (SAT) as providers of 'Vulnerable Activities' for strict AML/KYC compliance, effectively creating a regulated environment for retail access despite the banking sector's exclusion.

I. Regulatory Status

• Retail cryptocurrency trading is legal and regulated in Mexico.
• Operates under a dual regulatory framework: the 2018 Fintech Law for definitions and structure, and AML laws for operational compliance.
• Regulated financial institutions (banks, licensed fintechs) are prohibited from offering crypto directly to the public due to Banxico's 'healthy distance' policy.
• Retail trading is conducted through non-financial entities that must register as providers of 'Vulnerable Activities' for AML purposes.

II. Key Regulatory Bodies

• Banco de México (Banxico):
  • The central bank; determines which virtual assets financial institutions can operate with.
  • Issued the restrictive Circular 4/2019 to enforce a 'healthy distance'.
• Comisión Nacional Bancaria y de Valores (CNBV):
  • The banking and securities regulator; supervises licensed Financial Technology Institutions (IFPEs) regarding their fiat operations and compliance with the Fintech Law.
• Secretaría de Hacienda y Crédito Público (SHCP) / Tax Administration Service (SAT):
  • The finance ministry and tax authority; enforce AML/CFT rules.
  • The SAT manages the registry for crypto exchanges as providers of 'Vulnerable Activities'.
• Unidad de Inteligencia Financiera (UIF):
  • The Financial Intelligence Unit; receives reports on suspicious and high-value crypto transactions to prevent money laundering.

III. Important Legislation

• Ley para Regular las Instituciones de Tecnología Financiera (Fintech Law) (Enacted: 2018-03-09):
  • Established the legal definition of 'Virtual Assets' and the framework for Financial Technology Institutions (ITFs).
  • Granted Banxico authority over which virtual assets regulated entities can handle.
• Circular 4/2019 by Banxico (Enacted: 2019-03-08):
  • Restricts financial institutions from offering virtual asset services to the public.
  • Allows them to use crypto only for internal operations with prior authorization, enforcing the 'healthy distance' policy.
• Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita (LFPIORPI) (Anti-Money Laundering Law) (Amended after 2012-10-17):
  • Classifies the habitual and professional exchange of virtual assets as a 'Vulnerable Activity.'
  • Mandates registration with the SAT, customer identification (KYC), and transaction reporting.

IV. Compliance Requirements

• For crypto-service providers (exchanges):
  • Mandatory registration with the SAT as a provider of a 'Vulnerable Activity.'
  • Implementation of strict Know-Your-Customer (KYC) and Anti-Money Laundering (AML) procedures.
  • Obligation to report transactions exceeding approximately 60,000 MXN to the UIF.
• For users/traders:
  • Profits from cryptocurrency trading are subject to Income Tax (ISR).
  • Transactions may also be subject to Value Added Tax (IVA), generally treated as the sale of goods or intangibles.

V. Notable Restrictions or Limitations

• 'Healthy Distance' Policy: Regulated financial entities (banks and licensed fintechs) are prohibited from custodying or selling crypto assets directly to retail users. They can only handle the fiat (MXN) side of transactions.
• This restriction has led to a prevalent dual corporate structure where exchanges operate a licensed IFPE for fiat wallets and a separate, often foreign, entity for the crypto trading platform.
• Banco de México has not authorized any virtual assets for public offering by regulated institutions under the Fintech Law framework.

VI. Recent Developments or Notes

• Mexico was a pioneer with the comprehensive 2018 Fintech Law, but the subsequent 2019 central bank circular adopted a conservative stance toward integrating crypto into the formal financial sector.
• The result is a stable and accessible retail market, but one structurally separated from the traditional banking system.
• The SPEI interbank electronic payment system remains a critical enabler, allowing for seamless fiat peso transfers to and from crypto exchanges despite the banking sector's inability to custody crypto itself.