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In this article, Alfonso Martel Seward, Chief Compliance & Legal Officer at Roxom, explains how Latin America is dealing with increasing interest in crypto and the challenges in compliance.
Highlights
Having grown into one of the world’s most vibrant crypto markets, Latin America now finds itself at a crossroads. A wave of practical adoption, from inflation hedging to faster remittances, has propelled billions into digital assets. But with that scale comes scrutiny. The Financial Action Task Force Travel Rule, once a back-office banking requirement, is quickly becoming a make-or-break standard for Virtual Asset Service Providers worldwide. In LATAM, where regulation lags behind innovation, the Travel Rule is no longer a distant requirement—it’s the key to future market access.
Crypto in Latin America has broken out of the margins—it’s gone mainstream. According to Chainalysis, the region received $415 billion in crypto between July 2023 and June 2024, capturing over 9% of global on-chain volume. Four LATAM countries (Brazil, Venezuela, Mexico, and Argentina) rank in the top 20 of the Global Crypto Adoption Index, and growth in the region is second only to Sub-Saharan Africa.
Stablecoins are the fuel behind this momentum. In Brazil and Argentina, they make up over 60% of all crypto transactions, a stark contrast to the global average of 44.7%. It’s easy to see why: for individuals navigating volatile currencies, unstable banking systems, and strict capital controls, USDT and USDC offer speed, affordability, and reliability.
Need to send money to family? A remittance in stablecoin costs under 1% and clears in minutes, far outperforming traditional rails that eat up to 6% and take days. For those paid in pesos but owing rent in dollars, stablecoins are a financial lifeline. Users convert salaries on payday, hold funds in USDT, and cash out only what they need, shielding themselves from inflation and bypassing restrictive FX policies.
This real-world demand sustains a growing roster of regional players. Bitso in Mexico, Mercado Bitcoin in Brazil, and Buenbit in Argentina have scaled to volumes unthinkable just five years ago. Meanwhile, Lightning gateways and tokenization startups are multiplying. Latin America is firmly in crypto territory, but whether it will be compliant is the pressing question.
The FATF Travel Rule, originally designed to track wire transfers in the traditional financial system, has become a cornerstone of global anti-money laundering frameworks. Its logic is simple: attach verified originator and beneficiary information to every transaction. When applied to crypto, this standard closes the anonymity gap that criminals exploit.
Many regions have already responded. The US has been enforcing the Travel Rule since 2013. Europe incorporated it into MiCA via the Transfer of Funds Regulation, which made it enforceable by the end of 2024. APAC leaders like Singapore, Japan, and South Korea embedded it in payments law years ago.
Latin America is still going through a lot of changes. Some LATAM countries are making strides toward compliance, but many others are stuck in a gray area. They recognize the Travel Rule on paper, but there isn’t much in the way of actual enforcement, whether from a technical standpoint or through legislation. The latest assessments from the FATF highlight this imbalanced situation, influenced by COVID-related delays, differing legislative timelines, and varying levels of political motivation.
For instance, Brazil is signaling active development with Federal Law 14.478/2022 and recent Central Bank consultations, however, progress has stalled while the Central Bank’s Public Consultations 109 and 110 (late 2024) wait to be converted into binding rules. Peru has gone a step further: UIF-Perú Resolution SBS 000132-2024 inserted Chapter VIII “Travel Rules” into its AML rulebook, setting its enforcement for August 2026. Argentina’s UIF Resolution 49/2024 mandates Travel Rule data exchange, but technical guidance is still missing. Chile’s Fintech Law 21.521 empowers the CMF to impose the rule, while Ecuador remains exploratory. Mexico—ironically, the region’s deepest market—still operates without a dedicated crypto statute, leaving compliance to a patchwork of banking circulars and correspondent-bank expectations.
This fragmentation creates uncertainty. Without harmonized enforcement, VASPs operate in limbo, where cross-border compliance becomes a technical nightmare and a business risk. The delay is no longer strategic—it’s a liability. As other regions solidify their requirements, LATAM firms that fail to comply may find themselves locked out of global networks.
At its core, the Travel Rule connects identity and transaction data. Know Your Customer (KYC) tells you who the user is; KYT tells you what the funds are doing. When these systems function separately, following the Travel Rule can either feel like just going through the motions or creating unnecessary delays. However, if they collaborate effectively (like linking identity to wallet activity in real time), they can identify genuine risks while allowing legitimate transactions to go through without a hitch.
For VASPs, that integration is critical. Without it, withdrawals freeze, deposits stall, and partners lose confidence. And then there’s the challenge of interoperability. Few Travel Rule protocols work with each other seamlessly. When two VASPs operate in jurisdictions with different or no rules, data exchange fails. That’s why compliance teams must map out who they deal with, what protocols are in use, and where the gaps lie.
Self-custody introduces some complexities. If exchanges have to verify every external wallet, they might end up pushing users towards unregulated options. Different places have different responses: some outright ban these kinds of transfers, while others, like the UK, take a more flexible, risk-based approach, only collecting data when there are warning signs. Latin America could really benefit from adopting this more adaptable model; it’s practical, enforceable, and fits better with how users actually behave.
For now, it’s not regulators raising alarms—it’s the market. Banks, liquidity providers, and institutional custodians demand proof of Travel Rule implementation. Those who can’t deliver risk losing key relationships and revenue. The first formal fine may still be on the horizon, but reputational and operational costs are already here.
To meet the 2025–2026 compliance window without sacrificing user growth, VASPs in LATAM need smart, seamless solutions. The ideal setup is an end-to-end compliance stack that builds the Travel Rule into existing KYC/KYT flows, without adding user friction.
What does that look like? There are a few must-haves:
When implemented effectively, the Travel Rule can serve as a powerful tool for compliance rather than just a bureaucratic hurdle. It helps identify suspicious activities while allowing legitimate transactions to proceed without interruption, building trust and helping the global financial system remain accessible and open.
