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Travel Rule Adoption in LATAM Led by Mexico

Mexico emerges as a frontrunner in adopting FATF’s Travel Rule for crypto, while other Latin American countries make varying progress in following similar guidelines.

Key Points

  • Mexico leads in adopting the Travel Rule as per GAFILAT study, requiring VASPs to share sender info in crypto transfers.
  • GAFILAT highlights Mexico’s advanced compliance with FATF guidelines and regulatory cooperation with fintech.
  • Brazil, Chile, El Salvador show progress in adopting FATF rules; Cuba, Nicaragua, Paraguay make modest strides.
  • Concerns raised for countries like Argentina, Uruguay, and others for lack of crypto sector regulation; Mexico’s model touted for combating illicit activities.

Mexico has emerged as a leader in adopting the Travel Rule, a study conducted by the Latin American Financial Action Task Force (GAFILAT) has found.

GAFILAT, which is affiliated with the global anti-money laundering watchdog, the Financial Action Task Force (FATF), comprises 18 Latin American countries.

The Travel Rule requires Virtual Asset Service Providers (VASPs) to share sender information and other data when transferring coins onto other VASPs’ platforms.

The FATF aims to make the Travel Rule a part of national law worldwide. Countries such as Japan and South Korea have already implemented this rule.

Furthermore, the FATF has called on governments to enforce know your customer (KYC) protocols on crypto exchanges to put an end to anonymous crypto trading. The Travel Rule is just one of the guidelines created by the FATF for the crypto sector.

GAFILAT’s Report

GAFILAT’s report highlighted Mexico’s advanced adoption of FATF guidelines, commending the country’s cooperation with the fintech industry in regulatory matters.

The report also mentioned that Mexico has developed secondary regulations to comply with FATF recommendations.

In a previous report, GAFILAT praised Mexico for its progress in applying regulatory standards, noting that the country had implemented around three-quarters of the FATF’s 40 protocols.

According to GAFILAT’s most recent report, Brazil, Chile, and Bitcoin-friendly El Salvador are also making significant progress in adopting FATF guidelines.

The organization commended Cuba, Nicaragua, and Paraguay for their modest but significant progress in this regard. Colombia, Ecuador, and Bolivia were recognized for implementing regulations that establish minimum obligations for VASPs.

Concluding Thoughts

However, GAFILAT expressed concern about Argentina, Uruguay, Costa Rica, Guatemala, Honduras, Panama, Peru, and the Dominican Republic, stating that these countries have not taken any steps to regulate their crypto sectors.

Argentina, in particular, has indicated its willingness to address this issue as it seeks financial aid from the IMF.

The country has recently intensified its crackdown on exchanges and announced the highest energy tariffs for crypto miners. Sebastián Negri, the head of the National Securities Commission, has emphasized the urgent need for Buenos Aires to comply with FATF recommendations.

Mexico’s proactive approach to crypto regulation serves as an example for other Latin American countries, highlighting the need to establish clear guidelines to combat money laundering and illicit activities in the crypto sector.

As countries like Argentina look to follow Mexico’s lead, it is expected that the adoption of FATF guidelines will continue to shape the regulatory landscape in the region.