Honduras' Financial Regulatory Body Prohibits Crypto Transactions by Financial Institutions
Summary:
The National Banking and Securities Commission (CNBS) of Honduras has banned financial institutions in the country from dealing with cryptocurrencies, citing lack of regulations and potential risks like fraud and terror financing. Despite these measures, crypto exchanges continue to operate freely in the country. While the central bank has issued a warning over crypto use, it is also studying the issuance of a digital currency. Areas like Bitcoin Valley and the city of Próspera, which have embraced Bitcoin as legal tender, may be impacted by this resolution, details of which remain unclear.
In a recent move by the National Banking and Securities Commission (CNBS) of Honduras, a resolution has been released dictating a prohibition on domestic financial institutions from dealing with cryptocurrencies. As the Honduran central bank is not capable of assuring cryptocurrency-based transactions due to the lack of regulatory measures, this decision was taken.
The resolution alertly pointed out that the involvement with cryptocurrencies and blockchain-based financial services could potentially lead to fraudulence and put users at risk legally as well as operationally. It added that there is no legal obligation for individuals to recognize or transact with them as a valid payment method, therefore their acceptance could be retracted at any moment.
Unregulated cryptocurrencies can also be preyed upon for unlawful activities such as financing terrorism, money laundering, and fraud, the resolution stressed. Consequently, the CNBS decided to: "Forbid all institutions under the regulation of the National Banking and Securities Commission from endorsing, investing in, operating with or facilitating any activity related to virtual currencies, crypto assets, tokens or any similar virtual asset."
Supervised institutions are also strictly banned from holding derivative instruments founded on crypto assets. The resolution proposed the inclusion of crypto-related risks in financial education programs as well. Despite these stringent regulations, cryptocurrency exchanges still function independently in Honduras.
The CNBS comes under the presidential administration of Honduras. This resolution, which was approved without any opposition, was passed on Feb. 12 and put into immediate effect on Feb. 15. Interesting to note is that Honduras received its first Bitcoin ATM recently.
After a series of press reports speculated Honduras might follow in El Salvador's footsteps by declaring Bitcoin (BTC) as legal tender, the Honduran central bank issued a caution statement regarding cryptocurrency usage in March 2022. Simultaneously, it shared that research on developing a central bank digital currency is underway.
Regardless of these constraints, Bitcoin has not been completely sidelined in Honduras. Bitcoin Valley, an initiative to attract tourists allowing payment options in Bitcoin, USD or the Honduran lempira, was inaugurated in Honduras in the summer of 2022. In addition to this, a city in the special economic zone on the island of Roatan named Próspera, had legalized Bitcoin and announced it as an official accounting unit in 2022. The impact of the CNBS resolution on these areas still remains uncertain.
From the American perspective, fear and doubt amongst lawmakers are the root causes behind the proposed cryptocurrency regulations in the U.S.
Published At
2/17/2024 1:57:49 AM
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