The increased adoption of crypto assets in Latin America has obliged the financial watchdog to take decisive steps to protect the traditional financial system. In an advanced communication the Honduras National Banking and Securities Commission (CNBS) imposed restrictive measures on the involvement of financial institutions in crypto activities.
These restriction limits banks from facilitating crypto transactions in the region. The decision to ban bank in crypto transactions emanated from the growing demand for crypto assets that might erode the operation of the conventional financial system.
Honduras Impose Restrictive Measure on Bank
Citing the legal charges facing crypto in different jurisdictions, the CNBS took strategic steps to shield the traditional financial system from being replaced by digital assets. Based on the decentralized nature of crypto assets, this technology has challenged the conventional financial system in the delivery of fast, convenient and timely services.
In a previous meeting, the CNBS confirmed the crypto assets were not regulated in Honduras. This implies that the Central Bank of Honduras neither regulated nor controlled the buying and selling of crypto assets.
The CNBS noted that crypto assets were commonly used as an alternative financial product and payment method in Latin American countries. The regulators underlined that using crypto exposed the Honduran residents to inherent risks of financial losses.
The attempt to safeguard the consumer from financial losses forced the Honduran financial watchdogs to restrict banks’ involvement in crypto activities. With the new rules, banks and financial institutions will be prohibited from supporting any crypto-related transaction in Honduras.
Global Regulators Seek to Protect Traditional Financial Systems from Eroding
Apart from this, banks are restricted from conducting any financial transactions on behalf of individuals or entities that buy and sell crypto assets. The CNBS explained that the corrective steps taken by the Honduras authority aims at uphold compliance with the law.
Based on the risk associated with crypto assets, the CNBS urged the financial institutions to organize education programs, cautioning the public on the demerits of crypto investments.
The new rules came months after the special economic region in Honduras Prospera officially accepted Bitcoin as a unit of measure. This move replicated the initiatives taken by Honduras’ neighbouring countries, including El Salvador and Argentina, to tap the benefits of crypto assets.
In an earlier interview with the commissioner of Próspera Zone for Employment and Economic Development (ZEDE), Jorge Colindres confirmed that the acceptance of Bitcoin in the special economic zone aimed at improving the accessibility to financial products and services.
The commissioner noted that Bitcoin will offer Honduran residents a convenient method to execute financial transactions. In the latter, the commissioner explained that for a long time, Honduras has been seeking ways to provide financial freedom to the public.
High Crypto Adoption in Latin America
Reportedly, the acceptance of Bitcoin as a unit of account in Prospera aimed at creating a friendly environment for crypto projects. Similarly, Honduras’ neighbour El Salvador has actively campaigned for the use of crypto assets within the region.
For the past few years, El Salvador has sought to leverage the power of crypto assets to boost financial inclusivity. The ongoing campaigns for Bitcoin in El Salvador positioned the country as a crypto-friendly state in Latin America.
Also, Argentina has replicated the El Salvador move to create a crypto-friendly enviroment. The biting inflation in Argentina forced President Javier Milei to enforce policies promoting crypto asset use.
Before ascending as the President of Argentina Milei pushed for Bitcoin adoption in the region. In his campaigns, President Milei opposed the operation of the Argentine central bank, which was used as a political tool to levy hefty taxes.
He believed that Bitcoin would revive Argentina’s ailing economy and plans to implement monetary control measures to curb the double-digit inflation rate. Apart from Argentina, the Venezuelan authority has joined the list of crypto-friendly states in Latin America. In 2019, the Venezuelan government introduced a legal system that accepts crypto payments.
