Honduras Bans Financial System from Trading Cryptocurrency, Citing Illicit Activities

Honduras flag with the word "Banned" stamped on the background of image

Honduras’ CNBS regulator has banned the financial system from trading in cryptocurrency and similar virtual assets, citing risks of fraud and money laundering. The resolution, which takes immediate effect, prohibits institutions under CNBS supervision from engaging in activities involving cryptocurrencies, tokens, or any unauthorized virtual assets. This move underscores regulatory concerns in a country where crypto assets are not currently regulated by law.

Ban With Immediate Effect

The National Banking and Securities Commission (CNBS) of Honduras has announced a ban on the country’s financial system from trading in cryptocurrency and similar virtual assets. This decision, effective immediately, comes amidst concerns about potential fraud and money laundering activities associated with these assets.

The resolution prohibits institutions under CNBS supervision from engaging in any activities related to crypto, including “maintaining, investing, intermediating or trading in cryptocurrencies, crypto-assets, virtual currencies, tokens, or any similar virtual assets not issued or authorized by the central bank.”

The regulatory action, dated from Monday but disclosed on Friday, February 16 comes into immediate effect and prohibits institutions under CNBS supervision from participating in activities involving cryptocurrencies, crypto-assets, virtual currencies, tokens, or any similar unauthorized virtual assets. This move marks a significant regulatory stance in a country where crypto assets are currently not regulated by law, despite the operation of trading platforms within its borders.

Risks of Fraud and Money Laundering

The CNBS emphasized the challenges posed by platforms operating across multiple jurisdictions, highlighting their susceptibility to activities such as fraud, money laundering, and terrorist financing. Furthermore, it reiterated that the Honduran central bank cannot guarantee or assume responsibility for transactions involving such assets.

While the central bank continues to explore the feasibility of issuing its own digital currency, the status of this initiative remains pending. Meanwhile, the impact of the ban on initiatives like Honduras Prospera, which adopted bitcoin as legal tender within its territory, remains uncertain. The move signals a proactive approach by the Honduran authorities to address regulatory concerns in the rapidly evolving landscape of digital finance.

Regulator Concerns

While crypto assets remain unregulated in Honduras, platforms facilitating their trading exist within the country. CNBS expresses concern that the multi-jurisdictional nature of many of these platforms makes them difficult to control and potentially susceptible to illicit activities.

This move follows a warning from the Honduran central bank that it holds no responsibility for and cannot guarantee any transactions involving crypto. Additionally, the bank continues to explore the feasibility of issuing its own digital currency, though no decision has been reached.

Uncertainty surrounds the potential impact of this ban on Honduras Prospera, a special economic zone that adopted Bitcoin as legal tender in April 2022.

Honduras’ recent action joins a growing list of countries implementing restrictions on cryptocurrencies, highlighting the ongoing debate surrounding their regulation and integration into traditional financial systems.

Author: Grace

Grace likes gardening. She holds some BTC and ETH.