The bank of Honduras strengthens control over cryptocurrencies: ban on trading and holding digital assets

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The bank of Honduras, National Banking and Securities Commission, has recently announced a ban regarding the country’s financial institutions, prohibiting them from participating in crypto trading and holding digital assets. 

This measure has been adopted with the aim of preserving the integrity of the national financial system, through stricter control. Below we see all the details. 

Honduras: the implications of the bank’s trading ban on the crypto market 

As anticipated, the National Banking and Securities Commission (CNBS) of Honduras has issued a ban that prevents local financial institutions from participating in crypto trading or holding digital assets. 

Currently, Honduran regulations do not include specific provisions for cryptographic assets, exposing users to risks such as fraud, operational issues, and legal uncertainties. 

There are also growing concerns about the use of such assets for illicit activities such as money laundering and terrorism financing.

The CNBS has highlighted the challenges related to the decentralized nature of many cryptocurrency-related businesses operating in Honduras, often registered in external jurisdictions. 

This decentralization makes regulatory supervision difficult, allowing potentially unmonitored activities.

The absence of specific regulations on cryptocurrencies in Honduran legislation exposes financial consumers to risks and fraud, as highlighted by the regulatory authority. 

Therefore, the CNBS has issued a directive that explicitly prohibits Honduran financial entities from associating with cryptocurrencies, virtual currencies, tokens, or digital assets not authorized by the Central Bank of Honduras.

This move aims to maintain a tight control over financial activities to preserve the integrity of the sector in the country.

Institutional interest in crypto, ban in Honduras and banking pressures in the USA

The ban on the use of cryptocurrencies in Honduras comes at a time when institutional interest in the sector is increasing, with the launch of several exchange-traded funds (ETFs) of Bitcoin in the United States.

US banking actors are pushing the Securities and Exchange Commission (SEC) to review the rules that make it expensive to provide custody services for these ETFs. 

The request has emerged from several banking institutions that wish to actively participate in the cryptocurrency sector, emphasizing the growing importance and demand for regulation in this area.

Meanwhile, Matt Hougan, Chief Investment Officer at Bitwise, highlighted that this request reflects the change in the “trend of cryptocurrency regulation in Washington” caused by the Bitcoin ETFs.

According to the data from ByteTree, investment vehicles holding Bitcoin now contain over 955,000 BTC, with an estimated value of nearly 50 billion dollars.

In addition to the United States, other jurisdictions, including Hong Kong, are opening up their region to promote the development of cryptocurrency trading activities.

Hong Kong and regulatory reform: extending regulations on OTC crypto trading

Unlike Honduras, the regulatory authorities of Hong Kong are considering expanding cryptocurrency trading activities, introducing stricter licensing requirements and rigorous testing procedures.

The legislative proposal aims to limit the range of assets available on over-the-counter (OTC) trading platforms, intensifying regulatory oversight in the cryptocurrency sector.

In the context of a recent public consultation conducted by the financial services of Hong Kong and the Treasury Office, the public was invited to express their opinion on the possible inclusion of OTC cryptocurrency trading in current regulations. 

The proposal provides that, if approved, OTC trading activities will be subject to the same regulatory requirements as traditional cryptocurrency exchanges. This will lead to a more limited selection of products available for sale to customers.

According to the proposal, anyone conducting spot trading activities of virtual assets in Hong Kong will need to obtain authorization from the Commissioner of Customs and Excise, subject to criteria of fitness, probity, and other factors considered relevant by the Commissioner.

The public debate has been mainly initiated to address concerns related to anti-money laundering measures, as currently OTC trading escapes the strict requirements imposed on traditional cryptocurrency exchanges.