The crypto community in Honduras received surprising news as the National Banking and Securities Commission of Honduras (CNBS) announced that banks are not allowed to hold or conduct transactions of cryptocurrencies.
The country’s regulatory authority has decided that because it doesn’t have sufficient regulations to let crypto-related activities take place for banking institutions,
The CNBS announced that unless it cante the crypto industry effectively inside the country, it cannot allow the financicountry’s financial institutions to crypto in any way or form.
One of the main points targeted in the resolution passed by the authorities revolves around the scam and fraud incidents many crypto users have faced on numerous occasions, and the regulators have said that it doesn’t want its institutions to go through the same ordeal.
Also, the users of cryptocurrencies and financial services based on blockchain technology are vulnerable to operational and legal risks, which doesn’t bode well for them, mainly because cryptocurrencies aren’t recognized as legal tender for most of the world. Their acceptance can cease at time because no one is legally obliged to transact or acknowledge them as a form of payment.
The CNBS has raised concern, which has always been the argument made by the critics of cryptocurrency, that it is not adequately regulated, has seen numerous cases of theft or fraud, and is used for various criminal activities like money laundering and terrorism financing. Therefore, the organization cannot allow such activities within its borders unless proper regulations are implemented to prevent misuse.
Therefore, the regulatory body has said it will forbid financial institutions overseen by the National Banking and Securities Commission from holding, investing in, brokering, or engaging with cryptocurrencies, digital assets, virtual currencies, tokens, or any comparable virtual asset.
The ban’s scope is not limited to essential crypto holding or investing. In addition to the prohibition above, regulated entities are also barred from possessing derivative instruments linked to crypto assets.
The resolution mandates the inclusion of risks associated with crypto assets in financial education initiatives. Notably, cryptocurrency exchanges operate without constraints in Honduras, so these resolutions might change the current sentiment of crypto holders.
The CNBS operates under the Honduran presidential administration. Dated February 12, the resolution was made public on February 15, indicating unanimous approval and immediate enforcement.
In March 2022, the Honduran central bank issued a cautionary statement regarding cryptocurrency use, coinciding with speculations about the nation’s potential adoption of Bitcoin as legal tender, akin to El Salvador’s approach. Concurrently, the central bank announced its exploration of a central bank digital currency issuance.
While it looks like the process of adopting Bitcoin as legal tender has been put on the back burner for now, especially after the latest announcement, it doesn’t mean that they are trying to put an all-out ban on crypto-related activities in the country.
In the summer of 2022, a small tourist town called Santa Lucia opened an attraction called Bitcoin Valley to attract crypto investors and tourists similar to the city, where they can incentivize them to spend in either US dollars, the country’s native currency, or in Bitcoin.
In Santa Lucia, locals anticipated increased business opportunities with the Bitcoin Valley initiative, allowing for payments in USD, Honduran Lempira, and Bitcoin.
Over 60 businesses participated, receiving training from Coincaex, Blockchain Honduras, and the Technological University of Honduras.
While customers could use BTC, transactions were converted to Lempira instantly via Coincaex to mitigate price volatility risks—the initiative aimed to boost the country’s tourism spending, which slowed dramatically post-COVID-19.
Business owners hoped to attract more customers and adapt to global technological trends, emphasizing the importance of embracing innovation in today’s interconnected world.
Honduras also includes the city of Próspera, a special economic zone on Roatan Island. Bitcoin became a legal tender in 2022 and was recognized as a unit of accounting in January. The impact of the CNBS resolution on these regions remains uncertain.
