It’s Time to Move Your Crypto Business out of the United States

It’s Time to Move Your Crypto Business out of the United States

Setting up a cryptocurrency exchange or an Exchange-Traded Fund (ETF) in the United States can be challenging due to the regulatory environment. The U.S. Securities and Exchange Commission (SEC) has been reluctant to approve Bitcoin ETFs and has called recent applications inadequate. 

They believe that these applications have not been specific enough about how they will manage a “surveillance-sharing agreement,” which is meant to deter fraud and manipulation by ensuring the fund issuer is monitoring market trading activity, clearing activity, and customer identity. The SEC has stated that all Bitcoin ETF applications have fallen short in this regard. Additionally, the SEC has concerns about the price of Bitcoin being open to manipulation, which is one of the main reasons they have been hesitant to approve a spot Bitcoin ETF​.

Bermuda, on the other hand, has been striving since 2018 to be a FinTech hub for regulated digital asset businesses. The island has established and clear regulatory frameworks for investment funds and digital asset businesses, making it an attractive location to set up a digital asset or blockchain fund. Some of the benefits of Bermuda include a world-class financial center, innovative and flexible structures with a robust legal and regulatory compliance framework, quality and expertise of service providers, ease of doing business, and a stable political climate​.

Bermuda offers a variety of fund structures, including private funds, professional class A and B funds, and standard funds. Depending on the investment strategy and investor type, different structures may be more optimal. Importantly, all funds are required to seek permission from the Bermuda Monetary Authority (BMA), and directors and service providers need to be ‘fit and proper’. There’s no requirement for directors to be registered with the BMA. If the equity interests of the fund are to be tokenized, the BMA would still consider the fund to be offering equity interests, requiring BMA registration​​.

Service providers that your fund may need to engage include a registered office provider, an administrator and custodian, an auditor, independent directors, and individuals to handle FATCA and Anti-Money Laundering and Anti-Terrorist Financing Requirements. Bermuda has legislation in place to accommodate these needs​.

Bermuda was a pioneer in the digital asset sector and implemented its digital asset legislation in 2018, which established the foundation for a comprehensive legislative and regulatory framework designed to support growth in the financial technology (Fintech) Sector. The Digital Asset Business Act 2018 (“DABA”) and the Digital Asset Issuance Act 2019 (“DAIA”) regulate ‘digital asset business’ activities conducted in or from within Bermuda. However, funds pursuing a digital asset and/or blockchain-focused strategy would not be subject to DABA or DAIA unless such an investment fund conducts a public sale of its tokenized equity interests​​.

Employee Requirements

There is a requirement to have employees in Bermuda if you operate a digital asset business or crypto business in Bermuda. The Bermuda Monetary Authority (BMA) requires all licensed digital asset businesses to have a senior representative who is resident in Bermuda. The senior representative must be knowledgeable in digital asset business and related Bermuda laws and regulations. They must also be able to report to the BMA on the activities of the licensed business.

In addition to the senior representative, the BMA also requires licensed digital asset businesses to have a minimum of two other employees who are resident in Bermuda. These employees must be responsible for the day-to-day operations of the licensed business.

The BMA’s requirement for employees in Bermuda is designed to ensure that licensed digital asset businesses have a physical presence in the country and that they are subject to the BMA’s supervision. This helps to protect investors and ensure that licensed digital asset businesses are operating in a compliant manner.

There are some exceptions to the BMA’s requirement for employees in Bermuda. For example, the BMA may allow a licensed digital asset business to have a senior representative who is resident outside of Bermuda if the business can demonstrate that it has adequate controls in place to ensure compliance with Bermuda’s laws and regulations.

Capital Requirements

The capital requirements for setting up a digital asset business or cryptocurrency exchange in Bermuda vary depending on the type of business. However, the Bermuda Monetary Authority (BMA) typically requires businesses to have a minimum of $100,000 in paid-up capital.

The following are the capital requirements for different types of digital asset businesses in Bermuda:

  • Digital Asset Custodian: $100,000
  • Virtual Currency Exchange: $100,000
  • Digital Asset Dealer: $100,000
  • Digital Asset Platform Operator: $100,000
  • Digital Asset Market Maker: $100,000

The BMA may require additional capital for businesses that are considered to be higher risk. For example, the BMA may require a business that is involved in margin trading to have a higher level of capital.

The BMA also requires businesses to maintain a certain level of capital throughout their operations. This means that businesses must maintain a minimum level of capital in their accounts and must be able to demonstrate that they have the ability to meet their financial obligations.

The capital requirements for digital asset businesses in Bermuda are designed to ensure that businesses have the financial resources to operate in a compliant manner and to protect investors. If you are considering setting up a digital asset business or cryptocurrency exchange in Bermuda, you should contact the BMA to discuss your specific requirements.


Please contact me at for more information on setting up a cryptocurrency exchange or digital asset business. Keep in mind that only the best applicants will receive a license as Bermuda fights to ensure it doesn’t become the next Bahamas. 

Setting up a Swiss Crypto Exchange or Fintech Business

Setting up a Swiss Crypto Exchange or Fintech Business

In this post, I’ll look at setting up a Swiss Crypto Exchange or fintech business using a fintech license or as a Qualified Intermediary. It is also possible to operate as a full bank in this capacity, but this is beyond the scope of this article. 


Operating a cryptocurrency exchange in Switzerland involves dealing with financial transactions and requires a thorough understanding of the Swiss regulatory environment.

Here are some considerations about licensing:

  1. Banking License: If your exchange operates in a way that it accepts public deposits (which may occur if you hold customers’ fiat currencies or cryptocurrencies), you might need a banking license from the Swiss Financial Market Supervisory Authority (FINMA). However, obtaining a full banking license can be a lengthy and expensive process.
  2. FinTech License: To cater to the needs of the growing fintech industry, including cryptocurrency businesses, FINMA introduced a new regulatory category in 2019 called the “FinTech” license, or “banking license light”. This license allows institutions to accept public deposits of up to CHF 100 million, provided they do not invest these deposits and do not pay any interest on them.
  3. Securities Dealer License: If your exchange is dealing with security tokens, it might need a securities dealer license.
  4. AML Regulations: Independent of the license type, any cryptocurrency exchange operating in Switzerland is required to comply with the Anti-Money Laundering (AML) Act. They must either join a self-regulatory organization (SRO) for AML purposes or be directly supervised by FINMA.

However, the specific licenses required can vary depending on the exact nature of your business, including the types of assets you’re dealing with (cryptocurrencies, security tokens, etc.), the services you offer, and the way your business operates. Furthermore, Switzerland has a highly decentralized political system, and there may be additional cantonal requirements to consider.

Setting up a Crypto Exchange in Switzerland

Here are the general steps you’d need to follow to open a cryptocurrency exchange in Switzerland. These steps may change over time as legislation evolves, so always consult with a local legal expert for the most up-to-date information.

1. Set Up a Swiss Company: In general, a crypto exchange must be registered as a Swiss company, which typically takes the form of a public limited company (AG) or a limited liability company (GmbH). The company must have a registered office in Switzerland. See Aged Swiss Trust below.

2. Membership in a Self-Regulatory Organization (SRO): Switzerland operates a dual system of financial market regulation, composed of federal regulation by the Swiss Financial Market Supervisory Authority (FINMA) and self-regulation by SROs. Depending on the type of financial service offered, crypto businesses must either become members of an SRO or be directly supervised by FINMA.

3. Apply for Necessary Licenses: If the exchange intends to accept public deposits, it will usually need a banking license. Additionally, if the exchange also operates as a securities dealer, it will need a securities dealer’s license. These licenses are granted by FINMA. Crypto exchange businesses might also be subject to the Swiss Anti-Money Laundering (AML) Act, which would require a FINMA license under the AML Act.

Switzerland has introduced a new licensing category called the “FinTech” license, or “banking license light”. This new regulatory category allows institutions to accept public deposits of up to CHF 100 million, provided they do not invest these deposits and do not pay any interest on them. These new FinTech licenses are less expensive and less complicated to obtain than a full banking license.

The requirements for the FinTech license are:

  • Having the necessary organization, qualified staff, and appropriate infrastructure.
  • Complying with the Anti-Money Laundering Act.
  • Keeping customer deposits fully segregated from the business’s operating capital.
  • Ensuring a minimum capital of 3% of the accepted public funds, but no less than CHF 300,000.
  • Compliance with Local Laws: Compliance with local laws and regulations is essential, especially regarding money laundering and securities regulations. Companies may also need to comply with other rules related to taxation, data protection, and consumer protection.

4. Secure Necessary Funding: Operating a crypto exchange can be capital-intensive. Aside from regulatory capital requirements, businesses will need enough funding to build their platform, employ staff, and cover operational costs.

5. Build Relationships with Banks: Crypto exchanges typically need relationships with banks to handle customer deposits and withdrawals. In Switzerland, finding a bank that will work with a crypto business can sometimes be a challenge.

6. Build and Test Your Platform: Before launching, you’ll need to build and thoroughly test your exchange platform. This typically involves software development and cybersecurity considerations.

7. Launch and Market Your Exchange: Once all legal and technical requirements have been met, you can launch your exchange. Ongoing marketing will likely be necessary to attract users to your platform.

Qualified Financial Intermediaries

As per the Anti-Money Laundering Act (AMLA) of Switzerland, a Qualified Financial Intermediary (QFI) is a financial intermediary that either is directly supervised by the Swiss Financial Market Supervisory Authority (FINMA), or is a member of a self-regulatory organization (SRO) recognized by FINMA for the purpose of money laundering supervision.

The term “financial intermediaries” is broadly defined and can include not only banks, insurance institutions, and securities dealers, but also entities such as asset managers, collective investment schemes, and even certain types of fintech companies. These intermediaries need to comply with the Swiss AMLA.

As per Paragraph 2, Section 3 of the AMLA, a financial intermediary is obliged to join a self-regulatory organization (SRO) or to submit to direct supervision by FINMA.

In practical terms, financial intermediaries supervised under AMLA have to comply with duties such as:

  1. Due diligence obligations: They are obliged to verify the identity of their contracting party and, where necessary, establish the identity of the beneficial owner.
  2. Record-keeping: They have to keep records that fully reflect all transactions in such a way that third parties can understand them within a reasonable period of time.
  3. Clarification obligations: In the case of business relationships or transactions which appear unusual or in the case of suspicions of money laundering, a financial intermediary must clarify the economic background and the purpose of these transactions or relationships and document the results.

The licenses are used to enable financial intermediaries to conduct their business within the legal framework of Switzerland. Once a company is classified as a QFI, it is authorized to perform activities like accepting and holding deposits, lending, securities dealing, asset management, and more, depending on the specifics of the license. However, the company is obliged to comply with AMLA and other relevant regulations.

Using an Aged Swiss Trust for a Crypto Exchange or Fintech Business

Establishing a cryptocurrency exchange or a fintech business under an aged Swiss trust or “shelf corporation” can have several advantages:

  1. Established History: An aged corporation is a company that has been around for a while, which can make it appear more credible to customers, business partners, and banks. This is particularly beneficial in the fintech and crypto space, where trust is crucial.
  2. Business Relationships: Existing corporations may already have established relationships with banks, suppliers, and other business partners. These relationships can be leveraged when launching new services, like a crypto exchange.
  3. Speed of Setup: Aged corporations are already registered and have fulfilled all necessary legal requirements, so they can be faster to set up compared to starting a new company from scratch. This can help your business get to market more quickly.
  4. Easier Access to Credit and Investment: Some banks and investors see older corporations as less risky, which can make it easier to obtain credit or attract investment.
  5. Regulatory Approval: Regulatory bodies may view older corporations more favorably, which could potentially facilitate the process of obtaining necessary licenses.
  6. Corporate Image: As you mentioned, the age of a company can help improve the business’s image with customers and with business partners, systems providers, and correspondent banking partners. It can provide a sense of stability and reliability.

However, it’s important to keep in mind that there are also potential drawbacks to using an aged corporation. For example, you may inherit liabilities from the previous operation of the company, or there may be additional due diligence required to ensure the company’s previous operations were in good standing. Additionally, an aged corporation may be more expensive to purchase than setting up a new corporation.

Moreover, regardless of the age of the company, compliance with local regulations, including obtaining the necessary licenses and ensuring adherence to anti-money laundering (AML) regulations, is still required.


In conclusion, setting up a cryptocurrency exchange in Switzerland can be a complex process that requires thorough preparation and a deep understanding of the regulatory landscape. However, with the right approach and guidance, it’s possible to navigate this process and establish a successful business.

It’s strongly recommended to seek advice from legal experts and professionals who are familiar with Swiss fintech regulations and the process of setting up a business in Switzerland. This way, you can ensure that your business is fully compliant with all relevant laws and regulations, and set up for success in the long term.

For more information on acquiring an aged Swiss Trust and building an exchange or fintech in Switzerland, please contact us at 

mexican SOFOM

Setting up a SOFOM in Mexico to Operate a Fintech, Financial Services, or Crypto Business

A Mexican SOFOM, or Sociedad Financiera de Objeto Múltiple, is a type of financial institution that can provide a variety of financial services, including money transmission, cryptocurrency, loans, leases, and factoring. SOFOMs can be either regulated or unregulated, with regulated SOFOMs being subject to more oversight by the Mexican government.

Fintech, financial services, and crypto companies in Mexico are increasingly using SOFOMs to provide their customers with a wider range of financial services. For example, fintech companies may use SOFOMs to provide loans to small businesses, while financial services companies may use SOFOMs to offer investment products to their customers. Crypto companies may also use SOFOMs to provide services such as cryptocurrency trading and custody.

SOFOMs offer a number of advantages for fintech, financial services, and crypto companies in Mexico. First, SOFOMs can provide these companies with access to a wider range of financial products and services. Second, SOFOMs can help these companies to reach a wider customer base. Third, SOFOMs can help these companies to comply with Mexican financial regulations.

As the fintech, financial services, and crypto sectors in Mexico continue to grow, SOFOMs are likely to play an increasingly important role in these industries. SOFOMs offer a number of advantages for these companies, and they can help these companies to provide their customers with a wider range of financial services.

The Most Efficient Structure for a Financial Services, Fintech or Crypto Business in Mexico is a SOFOM

A Sociedad Financiera de Objeto Múltiple (SOFOM) is a type of financial institution in Mexico that is authorized to provide a wide range of financial services, including loans, leases, and factoring. SOFOMs are regulated by the Comisión Nacional Bancaria y de Valores (CNBV), the Mexican banking and securities commission.

There are two types of SOFOMs: regulated and unregulated. Regulated SOFOMs are subject to more stringent regulatory requirements than unregulated SOFOMs. However, regulated SOFOMs also have access to a wider range of financial services and products.

A SOFOM is the most efficient structure for a number of reasons. First, SOFOMs are authorized to provide a wide range of financial services, which allows businesses to offer a more comprehensive suite of products to their customers. Second, SOFOMs are regulated by the CNBV, which provides businesses with a high level of financial stability and security. Third, SOFOMs have access to a wide range of financial resources, which allows businesses to grow and expand their operations.

If you are considering starting a financial services business in Mexico, a SOFOM is the most efficient structure to consider. SOFOMs offer a wide range of benefits, including access to a wide range of financial services, products, and resources.

Here are some additional benefits of incorporating as a SOFOM in Mexico:

  • Flexibility: SOFOMs have a great deal of flexibility in terms of the types of financial services they can offer. This allows businesses to tailor their offerings to the specific needs of their customers.
  • Scalability: SOFOMs are well-suited for businesses that are looking to grow and expand. They offer a wide range of financial resources that can help businesses to finance their growth.
  • Reputation: SOFOMs are regulated by the CNBV, which gives them a high level of financial stability and security. This is important for businesses that want to build a strong reputation with their customers.

Here are some specific examples of how SOFOMs are being used by fintech, financial services, and crypto companies in Mexico:

  • Fintech company Konfío uses SOFOMs to provide loans to small businesses.
  • Financial services company Banorte uses SOFOMs to offer investment products to its customers.
  • Crypto company Bitso uses SOFOMs to provide cryptocurrency trading and custody services.

These are just a few examples of how SOFOMs are being used by fintech, financial services, and crypto companies in Mexico. As these industries continue to grow, SOFOMs are likely to play an increasingly important role in providing financial services to Mexicans.

Here are the steps on how to set up a SOFOM in Mexico:

  1. Obtain a corporate charter. The first step is to obtain a corporate charter from the Secretaría de Economía (Secretariat of Economy). The corporate charter will set forth the basic structure of your company, including its name, purpose, and capitalization.
  2. Register with the National Banking and Securities Commission (CNBV). Once you have obtained your corporate charter, you must register with the CNBV. The CNBV is the Mexican government agency responsible for regulating the financial sector. The registration process with the CNBV can be complex, so it is advisable to seek professional assistance.
  3. Obtain a license to operate as a SOFOM. Once you have registered with the CNBV, you must obtain a license to operate as a SOFOM. The license application process is also complex, so it is advisable to seek professional assistance.
  4. Establish a physical presence in Mexico. To operate as a SOFOM in Mexico, you must establish a physical presence in the country. This means that you must have an office or other location where you can conduct business.
  5. Obtain the necessary permits and licenses. In addition to the license to operate as a SOFOM, you may also need to obtain other permits and licenses from local authorities. The specific requirements will vary depending on the location of your business.
  6. Hire qualified staff. To operate a successful SOFOM, you will need to hire qualified staff. This includes employees with experience in the financial sector, as well as employees with experience in the Mexican market.
  7. Develop a marketing plan. Once you have established your business, you will need to develop a marketing plan to attract customers. This plan should include strategies for reaching potential customers, as well as strategies for building relationships with customers.

Here are some additional requirements for setting up a SOFOM in Mexico:

  • A business plan that outlines the company’s goals, strategies, and financial projections.
  • A financial model that details the company’s sources of funding and projected cash flows.
  • Background information on the shareholders, including their financial and professional qualifications.
  • A copy of the shareholders’ agreement.
  • A copy of the company’s bylaws.

We can provide local directors if that is your need, but they are not required. Local directors can be helpful in navigating the Mexican legal and regulatory environment. They can also help to build relationships with local businesses and government officials.

If you are considering setting up a SOFOM in Mexico, we encourage you to contact us for more information. We can help you to assess your needs and develop a plan to achieve your goals. You can reach me directly at 

doing business in mexico

An Inside Look at the Business Climate in Mexico for FinTech and Crypto Businesses

The dynamic business landscape in Mexico is offering fertile ground for both FinTech and crypto businesses. Driven by a potent mix of regulatory evolution, market potential, and consumer demand, Mexico has emerged as one of Latin America’s hotspots for these disruptive technologies. Here’s a look at the vibrant business climate in Mexico for FinTech and crypto enterprises.

Mexico’s Favorable Regulatory Landscape

In 2018, Mexico established itself as a regional pioneer by enacting the first FinTech Law in Latin America. This comprehensive legislation provides a regulatory framework for companies in the FinTech space, including crypto businesses, ensuring their operations’ safety, security, and transparency.

Under the law, FinTech companies can operate as Financial Technology Institutions (ITFs), while crypto-related businesses must be authorized by the Mexican Central Bank (Banxico). The law paves the way for increased consumer protection, fosters competition, and encourages financial inclusion.

While there are still aspects of the law that require further clarification, its presence symbolizes the government’s commitment to fostering an environment conducive to FinTech and crypto innovation.

Untapped Market Potential

Despite significant strides in financial inclusion, a substantial portion of Mexico’s population remains unbanked or underbanked. These individuals and businesses, underserved by traditional financial institutions, represent a considerable untapped market for FinTech and crypto businesses.

FinTech solutions, including digital wallets, peer-to-peer lending platforms, and microfinance services, offer a potential route to financial inclusion. Simultaneously, cryptocurrencies, by their decentralized nature, can provide an accessible alternative for individuals who struggle to access traditional banking services.

Consumer Demand

Mexico’s digital economy is growing, with increasing internet and smartphone penetration. The demand for digital financial solutions, from online banking and digital payments to investment platforms, is on the rise.

Furthermore, the younger demographics of Mexico are more open to adopting these new technologies, creating a vast user base for FinTech and crypto businesses. Crypto, in particular, is gaining popularity among millennials and Generation Z due to its potential for quick returns and its decentralized, global nature.

Crypto Climate

Despite regulatory uncertainty in many countries, Mexico’s attitude towards crypto has been mostly positive. While Banxico does not consider cryptocurrencies as legal tender, it acknowledges their use as a medium of exchange, unit of account, and store of value.

Mexico’s crypto market is rapidly growing, with several crypto exchanges operating in the country. Mexicans use cryptocurrencies for various purposes, including remittances, a sector where cryptocurrencies can offer quicker and cheaper cross-border transfers.

However, it’s important to note that crypto businesses must adhere to strict regulations, particularly concerning money laundering and customer protection. Crypto businesses planning to launch in Mexico should prepare for rigorous compliance procedures, including getting authorization from Banxico and implementing robust KYC (Know Your Customer) protocols.

Market Demand for Fintech and Crypto Businesses

The market for FinTech companies in Mexico has grown significantly in recent years, fueled by a convergence of economic, technological, and demographic factors. As of 2021, Mexico is considered the leader in the FinTech ecosystem in Latin America, boasting the largest number of FinTech startups in the region. This has primarily been spurred by the demand for digital financial services, which are more inclusive, efficient, and user-friendly compared to traditional banking methods.

Market Landscape

Mexico’s FinTech market is diverse, with companies specializing in a wide array of services such as digital banking, payments and remittances, insurance (InsurTech), personal finance, crowdfunding, and blockchain technology. Each of these sectors caters to different user needs, from offering unbanked populations access to financial services to providing small businesses with efficient and cost-effective banking solutions.

Significant progress has been made in regulations too, making Mexico an attractive location for FinTech innovation. In 2018, Mexico became the first country in Latin America to enact a FinTech law, aimed at promoting financial stability and defending against money laundering, while also nurturing innovation and competition in the financial sector.

Demand Drivers

A critical demand driver for FinTech companies in Mexico is financial inclusion. A sizable proportion of Mexico’s population remains unbanked or underbanked. Traditional banks often have stringent requirements or high fees that many citizens can’t meet. FinTech companies, with their flexible and accessible solutions, present an opportunity to address this issue by offering services such as mobile banking, microloans, and digital wallets.

Digital remittances have also emerged as a significant market, with Mexico being one of the largest remittance-receiving countries in the world. FinTech solutions for quick, cost-effective cross-border transfers are in high demand, opening up opportunities for startups in this field.

In addition, Mexico’s thriving e-commerce market is driving demand for digital payments solutions. Consumers are increasingly turning to online shopping, necessitating secure, efficient payment systems that traditional banking often fails to deliver.

Finally, Mexico’s young, tech-savvy population contributes to the increasing demand. With one of the youngest demographics in Latin America and high smartphone penetration, Mexico’s population is well-positioned to adopt digital financial services.


The combination of a growing need for financial inclusion, increasing digitalization, a thriving e-commerce sector, and a young, tech-oriented population sets the stage for substantial growth in Mexico’s FinTech market. As traditional banks struggle to meet evolving consumer needs, FinTech companies can step in to fill the gaps, leveraging technology to provide more accessible, affordable, and efficient financial solutions. Given these conditions, Mexico’s FinTech market presents considerable opportunities for existing companies and new entrants alike.

Mexico’s burgeoning FinTech and crypto sectors reflect the country’s broader commitment to embracing digital transformation and promoting financial inclusion. The favorable regulatory landscape, coupled with untapped market potential and increasing consumer demand, creates a fertile environment for FinTech and crypto businesses.

While challenges remain, including refining the regulatory framework and improving digital infrastructure, the momentum is clearly with FinTech and crypto. As these sectors continue to evolve, Mexico is well-positioned to be a leader in the FinTech and crypto revolution in Latin America.

For more information on where I recommend you set up a Fintech, financial services, or crypto business in Mexico, please have a read through Where to do Business in Mexico as a Fintech, Financial Services, or Crypto Company. For more on the suggested structure, see Incorporating a Financial Services Company in Mexico – the Mexican SOFOM.I hope you’ve found this article helpful. For more information on setting up a business in Mexico, and on forming a SOFOM, please contact me at

where to do business in Mexico

Where to do Business in Mexico as a Fintech, Financial Services, or Crypto Company

In this post, I’ll explain why I believe Tijuana is the best business city in Mexico in which to set up a fintech, financial services, or crypto business. I’ve traveled and done business throughout Mexico for over 20 years and can say without a doubt that Tijuana is the most efficient option for setting up a fintech business. Here’s why. 

Mexico’s burgeoning FinTech landscape is diverse, innovative, and geographically rich, with Tijuana emerging as the city of choice for setting up a FinTech business. Here, a confluence of strategic location, global business acceptance, linguistic proficiency, cost efficiency, and regulatory allowances merge to create an environment that is uniquely supportive of FinTech growth. Let’s dissect why Tijuana is the best city in Mexico for FinTech enterprises.

Proximity to the U.S. Borde

Tijuana’s strategic location, sitting just across the border from the United States, renders it a natural nexus between two significant economies. This proximity is not just geographical but also deeply intertwined within the fabric of business and culture in the region, offering enormous benefits to the FinTech sector.

Being adjacent to the United States, Tijuana is ideal for businesses targeting a cross-border audience. With easy access to the U.S. market, FinTech companies in Tijuana can exploit the advantages of both countries, navigating market trends, consumer behaviors, and regulatory landscapes with ease. Furthermore, the proximity enables a seamless flow of knowledge, technology, and talent between the two nations, thereby fostering innovation and growth.

Accepting of International Businesses and Investors

Tijuana’s open-door policy towards international businesses makes it a hotbed for globalization. The city’s economic policies are geared towards attracting foreign investment, boosting its global competitiveness, and enhancing its status as a cosmopolitan city. For FinTech businesses, this translates into a supportive, innovation-driven environment that fosters both domestic and international success.

Moreover, Tijuana is home to numerous international tech conferences and events, encouraging networking and collaboration. Such gatherings generate opportunities for FinTech startups to forge partnerships, secure investments, and enhance their global visibility.

Ease of Finding English-Speaking Workers

With a large percentage of its population bilingual in English and Spanish, Tijuana offers a considerable advantage for FinTech companies. English proficiency is a critical factor in the global FinTech landscape, and having access to a skilled, English-speaking workforce is crucial for businesses that wish to operate on an international level.

Why are there so many English speakers in Tijuana compared to other large cities in Mexico? First, many of the people deported from the Western United States end up in Tijuana. They need jobs and have excellent English skills. Second, many in Tijuana middle class have US visas and families in America. They learned English from a young age and travel to San Diego frequently. 

Cost of Labor Compared to the U.S.

Labor costs in Tijuana are significantly lower than in the United States, even though the level of skills and expertise can be comparable. This cost advantage makes Tijuana an attractive location for FinTech startups looking to operate lean while maintaining high-quality services. By reducing the labor cost burden, companies can invest more in product development, marketing, and other critical areas to boost their competitiveness and growth.

Ability to set up a SOFOM (Sociedad Financiera de Objeto Múltiple)

In Mexico, FinTech companies have the option to establish themselves as a SOFOM – a non-bank financial entity that can operate in Baja and the rest of Mexico. This legal entity, dedicated to providing loans and credit, offers the opportunity to conduct financial operations without the need for a traditional banking license.

Setting up a SOFOM in Tijuana means your FinTech business can operate across Baja California and Mexico as a whole, delivering financial services and innovative solutions to a broad and diverse market. Additionally, the ability to set up a SOFOM underscores the flexibility and supportiveness of Mexico’s regulatory landscape towards the FinTech sector.

About Tijuana

Tijuana, an eclectic border city that melds Mexican culture with a dynamic international influence, is a bustling metropolis that attracts people from across the globe. Known for its vibrant cultural scene and burgeoning economic potential, Tijuana is a fascinating city that holds promise for the future. Here’s an overview of Tijuana’s size, population, and demographics.

Size and Location

Tijuana is situated in the Baja California Peninsula, the second-longest peninsula in the world, right at Mexico’s border with the United States. It is the largest city in the state of Baja California and covers an area of around 637 square kilometers.

The city’s strategic location on the U.S.-Mexico border plays a significant role in shaping its economic, cultural, and demographic makeup. Its proximity to San Diego, with which it forms an international metropolitan area, gives it a unique cross-border characteristic.


As of 2023, the estimated population of Tijuana is over 1.8 million people, making it the sixth-largest city in Mexico. The population has seen substantial growth over the past few decades, largely fueled by internal migration from other parts of Mexico and an influx of international immigrants, particularly from the U.S., China, and the rest of Latin America.

The city has a high population density due to its role as a regional hub for employment, culture, and commerce. It also serves as a magnet for individuals and families seeking opportunities in the bustling border economy.


Tijuana boasts a diverse demographic makeup, contributing to its rich cultural fabric. The majority of Tijuana’s inhabitants are of Mexican descent, but there’s a significant presence of residents with international roots, primarily from the United States, China, and other Latin American countries.

The age distribution of Tijuana tends to skew younger, aligning with the general trend in Mexico. The city’s median age is in the late twenties, a testament to the youthful energy that drives Tijuana’s economic and cultural dynamism. This young demographic is critical to the city’s labor force and its potential for innovation and growth.

Given its border location, a significant proportion of Tijuana’s population is bilingual, with proficiency in both Spanish and English. This linguistic capability is a valuable asset, particularly in the business and service sectors, fostering cross-border commerce and cultural exchange.

In terms of socioeconomic status, Tijuana exhibits a broad spectrum. The city houses affluent neighborhoods with high-income households, alongside areas characterized by lower income levels. Over the years, economic development efforts have been aimed at addressing these disparities and promoting inclusive growth.

The Bottom Line

Tijuana’s unique blend of size, population, and demographics creates a lively and dynamic city that serves as a nexus of cultures, economies, and opportunities. With its strategic border location, youthful population, and rich cultural diversity, Tijuana offers a vibrant environment ripe for economic growth and international collaboration. As Mexico continues to progress, the city of Tijuana is poised to play a significant role in the nation’s journey toward a prosperous future.


Tijuana’s strategic location, supportive environment for international business, English-speaking talent, competitive labor costs, and legal flexibility make it an ideal setting for a thriving FinTech business. By harnessing these attributes, FinTech entrepreneurs in Tijuana are well-positioned to drive innovation, foster growth, and pave the way for a robust, future-proof financial landscape in Mexico.

I hope you’ve found this article helpful. For more on setting up a fintech, financial services business, or crypto company in Tijuana, or on incorporating a SOFOM, please contact me at

bank risks

The Risks of Buying a Bank

Buying a bank can be a lucrative investment, but it is important to be aware of the risks involved. Some of the most common risks associated with buying a bank include:

  • Loan book risks. The loan book is the collection of all of the loans that a bank has made. If the loan book is full of bad loans, the bank could face significant losses. It is important to carefully review the loan book before buying a bank to make sure that it is not too risky.
  • Regulatory risks. Banks are subject to a wide range of regulations. If a bank is not in compliance with these regulations, it could face fines or other penalties. It is important to carefully review the bank’s compliance history before buying it to make sure that it is not at risk of being fined.
  • Prior transaction risks. Banks often engage in a variety of transactions, including mergers and acquisitions, securities underwriting, and investment banking. If a bank has engaged in any risky transactions in the past, these transactions could pose a risk to the bank’s future. It is important to carefully review the bank’s prior transaction history before buying it to make sure that it is not at risk of being sued or facing other legal problems.

In addition to these risks, there are a number of other risks that could be associated with buying a bank. These risks can vary depending on the specific bank that is being bought. It is important to carefully consider all of the risks involved before buying a bank.

Here are some additional risks that buyers of banks should be aware of:

  • Financial market risk. Banks are exposed to a variety of financial market risks, such as interest rate risk, currency risk, and commodity price risk. These risks can cause the value of the bank’s assets and liabilities to fluctuate, which could lead to losses.
  • Operational risk. Banks are also exposed to operational risk, which is the risk of losses arising from human error, system failures, or natural disasters. Operational risk can be difficult to manage and can lead to significant losses.
  • Strategic risk. Banks can also face strategic risk, which is the risk of losses arising from poor strategic decisions. Strategic risk can be difficult to assess and can lead to significant losses.

Buying a bank is a complex and risky undertaking. It is important to carefully consider all of the risks involved before making a decision to buy a bank. For assistance in purchasing a bank, feel free to contact me at 

Credit Card Issing and Fintech Transaction Rules

Credit Card Issing and Fintech Transaction Rules

In this post, I will consider why card issuers and certain fintech businesses have compliance requirements and how those KYC and AML rules translate to transaction monitoring rules within the core system or compliance system. The focus of this post is on anti-money laundering and related transaction rules. 

Know Your Customer (KYC) and Anti-Money Laundering (AML) rules are important components of regulatory compliance for financial institutions, including those issuing virtual prepaid credit cards. Here is some sample transaction rules a company might use to meet KYC and AML obligations:

  1. Customer Identification Program (CIP): Every customer must be properly identified before a virtual prepaid card is issued. This requires collecting, at minimum, the customer’s full legal name, birth date, address, and identification number (like a Social Security number or passport number).
  2. Identity Verification: After collecting this information, it must be verified through reliable means. This can include checking the provided information against databases or asking for additional documentation like a scanned passport or utility bill.
  3. Risk-Based Verification: Customers who are likely to pose a higher risk of money laundering or terrorist financing may require enhanced due diligence, which can involve collecting more detailed information about their personal background, sources of funds, and intended use of the prepaid card.
  4. Ongoing Monitoring: After a card has been issued, its usage must be monitored for suspicious activity. This can include transactions that are unusually large, frequent, or inconsistent with the customer’s normal behavior.
  5. Transaction Limits: To reduce the risk of money laundering, virtual prepaid card issuers may set limits on the amount that can be loaded onto a card at any one time, or the total amount that can be transacted within a certain period.
  6. Reporting Suspicious Activity: If suspicious activity is detected, the card issuer has a duty to report this to the relevant authorities in a timely manner. This typically involves filing a Suspicious Activity Report (SAR).
  7. Record Keeping: Detailed records of all customer information, transactions, and any actions taken in response to suspicious activity must be kept for a certain period, usually five years.
  8. Sanctions Screening: The issuer must ensure that neither the customer nor the recipients of any funds from the card are on any government sanctions lists.
  9. Privacy and Data Security: All collected customer information must be stored securely to protect against data breaches. There should be policies in place to ensure that customer data is only used for the purposes it was collected for and is shared only with authorized entities.
  10. Regular Audits: Internal or external audits should be conducted periodically to ensure that all KYC and AML procedures are being followed, and to identify any areas where improvements can be made.

Please note that these are just samples and the actual rules may differ depending on the jurisdiction the company is operating in, as well as other factors. Always consult with a legal expert or a compliance officer when designing or updating your KYC and AML policies. You can reach us at 

Criminals can use credit cards in several ways to launder money:

  1. Credit Card Factoring: A common method involves setting up a shell company (a company that exists only on paper and has no office and no employees) and using it to process credit card transactions for non-existent goods and services. The shell company can then pass off these transactions as legitimate business income.
  2. Cash Withdrawals: Criminals can use credit cards to withdraw cash at ATMs, especially in foreign jurisdictions, to obscure the origin of the funds.
  3. Purchase and Resale: Individuals may use a credit card to purchase high-value items (like electronics, jewelry, etc.) and then sell these items to generate “clean” cash. This method allows the laundering of money through legitimate commercial transactions.
  4. Overpayment Fraud: This method involves the criminal intentionally overpaying on the credit card, then requesting a refund from the credit card company. The refund is then returned as a check, which can be deposited into a bank account, effectively converting illicit cash into seemingly legitimate funds.
  5. Gift Cards and Prepaid Cards: Criminals can purchase gift cards or prepaid cards using a credit card. These cards can then be sold for cash or used to purchase goods, thus obfuscating the source of the funds.
  6. Balance Transfers: By continuously transferring balances between different credit cards owned by the same individual or different individuals, money launderers can make it difficult for authorities to track the source of funds.
  7. Collusion with a Merchant: Criminals can also collude with corrupt merchants to carry out fraudulent transactions. The merchant will charge the credit card for non-existent goods or services, and after deducting a commission, transfer the rest of the funds back to the criminal.

These methods are illegal and can lead to severe penalties for the card issuer or fintech that allows the transaction through. Credit card companies and financial institutions must have systems in place to identify and prevent such activities, such as transaction monitoring systems, KYC procedures, and real-time fraud detection algorithms.

Money laundering involves making illegally-gained proceeds appear legal, a process typically accomplished through a three-step process: Placement, Layering, and Integration. Criminals have developed various methods to launder money using credit cards. Here’s how it could happen:

  1. Placement: The initial stage of money laundering where illicit money is introduced into the financial system. With credit cards, this can happen in a few ways:
    • A criminal could use a stolen or counterfeit credit card to purchase goods and then resell them for cash.
    • Fraudulently obtained credit cards could also be used to purchase other forms of monetary instruments, such as gift cards or prepaid cards, which can later be sold or used without leaving a direct link back to the criminal.
  2. Layering: This is the process of creating complex layers of financial transactions to disguise the audit trail and provide anonymity. In the context of credit cards:
    • The criminal might use the card to make numerous small purchases or cash withdrawals across different locations and businesses to obscure the source of funds.
    • They might also use the card to purchase items online, further complicating the trail because these transactions could involve multiple jurisdictions.
  3. Integration: This is the final stage where the ‘cleaned’ money is mixed with legally obtained money. With credit cards:
    • The criminal might operate a fake business and process false transactions using the credit card, making the money appear as legitimate earnings.
    • They might also use a legitimate business to charge the credit card for non-existent goods or services, then present this as legitimate income.

It’s important to note that financial institutions, card issuers, and fintech’s are well aware of these tactics, and have measures in place to detect and prevent such activities. These include monitoring for suspicious transaction patterns, implementing strong KYC and AML procedures, and reporting suspicious activities to the authorities.

Credit card transaction rules are guidelines or protocols established by credit card companies to detect and prevent fraudulent transactions, ensure regulatory compliance, and enhance customer security. Here are some common credit card transaction rules:

  1. Daily Spending Limit: To prevent fraudulent transactions, a daily spending limit is often set. If transactions exceed this limit, they may be denied until the cardholder confirms the transactions are genuine.
  2. Geographical Restrictions: Transactions made in unfamiliar locations or foreign countries may be flagged or blocked, especially if the cardholder hasn’t notified the card issuer about their travel plans.
  3. Frequency of Transactions: If there’s a sudden increase in the frequency of transactions, it could indicate fraudulent activity. The card issuer may block further transactions until they can confirm the activity with the cardholder.
  4. Unusual Purchase Patterns: If a transaction or series of transactions deviate significantly from the cardholder’s typical spending habits, they might be flagged as potentially fraudulent.
  5. Online and Card-Not-Present Transactions: These types of transactions can be riskier than in-person transactions, and may be subject to additional security measures, like requiring the cardholder to enter a CVV number.
  6. Incorrect Personal Information: If a transaction is attempted with incorrect personal information (e.g., wrong billing address or zip code), the transaction may be declined.
  7. Large Purchases: Large purchases may be flagged or blocked, especially if they’re inconsistent with the cardholder’s typical spending behavior.
  8. Suspicious Merchant Categories: Transactions with certain types of merchants (e.g., gambling websites or cryptocurrency exchanges) may be flagged or blocked due to the higher risk of fraud or regulatory compliance issues.
  9. Multiple Declined Transactions: If multiple transactions are declined in a short period of time, the card may be temporarily blocked to prevent potential fraud.

These rules help credit card issuers manage risk and protect customers from fraud. However, they’re not foolproof, and cardholders should always monitor their accounts for suspicious activity.

Transaction Rules for Credit Card Issuers and Fintech Companies:

  1. Account Opened, Maxed, and Closed: This rule will alert when the cardholder loads and uses the card up to the balance and then closes the account quickly. There should be a min value such as $5,000.  
  2. High-Risk Jurisdiction Transactions: This rule will alert any transactions that are conducted with high-risk jurisdictions, including those known for high levels of corruption, organized crime, or terrorist activity.
  3. Frequent Small Transactions: This rule will alert when there are frequent small transactions that, collectively, account for a substantial sum. This could be an indication of “structuring” or “smurfing,” techniques often used to evade reporting requirements.
  4. Rapid Movement of Funds: This rule alerts when there is rapid movement of funds from one account to another, or across multiple accounts. This could be indicative of layering, a money laundering technique.
  5. Transactions Just Below Reporting Threshold: This rule will alert transactions that are just below the reporting threshold set by the regulatory bodies. This could be an attempt to evade detection.
  6. Inconsistent Transaction Activity: This rule alerts when the transaction pattern significantly deviates from a customer’s usual behavior or expected transaction pattern.
  7. Round Dollar Transactions: This rule alerts when transactions are made in round numbers (e.g., $1000, $5000), especially when they occur frequently. Criminals often use round numbers for simplicity.
  8. Transactions Matching Sanctioned Lists: This rule will alert any transactions associated with individuals, organizations, or countries that appear on national and international sanctions lists.
  9. Cash Advances: This rule will alert frequent or large cash advances, which could indicate an attempt to obtain cash for illicit purposes.
  10. Multiple Cards to the Same Address: This rule alerts when multiple cards are issued to the same address. This could be a sign of a fraud or identity theft operation.
  11. Transactions with High-Risk Businesses: This rule will alert transactions with businesses known to be high-risk for money laundering, such as casinos, pawn shops, or shell companies.
  12. Non-Resident Transactions: This rule will alert when transactions occur frequently from non-residents, especially from high-risk jurisdictions.
  13. High Number of Declined Transactions: This rule will alert when a customer has a high number of declined transactions, which could indicate fraudulent activity.
  14. Unusual E-commerce Transactions: This rule alerts when there are unusual e-commerce transactions, such as frequent purchases from a single online vendor, which could be indicative of fraudulent activity.
  15. Inconsistent Shipping Information: This rule alerts when the shipping address frequently changes or doesn’t match the customer’s known address. This could be a sign of fraud.
  16. Sudden Increase in Credit Card Usage: This rule will alert when there is a sudden spike in credit card usage, which could indicate that the card has been compromised.
  17. Transactions at Odd Hours: This rule will alert when transactions are conducted at odd hours, inconsistent with the cardholder’s known behavior.
  18. Large Purchases or Withdrawals: This rule will alert any large purchases or cash withdrawals that are unusual based on the customer’s profile and transaction history.
  19. Transactions Involving Cryptocurrency Exchanges: This rule will alert when transactions are made to or from cryptocurrency exchanges, as these can sometimes be used to launder money.
  20. Use of the Card After a Long Period of Inactivity: This rule will alert when a card that hasn’t been used for a long period suddenly becomes active. This could indicate that the card has been compromised.
  21. Frequent Address Changes: This rule alerts when there are frequent changes to the cardholder’s registered address, which could be indicative of identity theft or fraud.
  22. Sequential Card Numbers: This rule will alert when multiple cards are issued with sequential numbers, which could indicate a mass production of fake cards.
  23. Card Not Present Transactions: This rule alerts when there are frequent or large ‘card not present’ transactions, which could suggest fraudulent online or phone purchases.
  24. Multiple Transactions at One Vendor: This rule will alert when there are multiple transactions at one vendor in a short amount of time, which may suggest either a system error or a fraudulent activity.
  25. Overseas Transactions: This rule alerts when a card is used in a foreign country, especially if the cardholder has not reported traveling.
  26. ATM Withdrawals in Multiple Locations: This rule alerts when frequent ATM withdrawals are made in different locations in a short time period, which could indicate the card is cloned.
  27. Multiple Declined Authorization Attempts: This rule will alert when there are multiple declined authorization attempts, which may suggest either a stolen card or a testing of a cloned card.
  28. High-Risk MCC Codes: This rule alerts when there are transactions associated with Merchant Category Codes (MCC) known to be high-risk for fraud or money laundering.
  29. Transaction Volume and Frequency: This rule will alert when a card’s transaction volume or frequency significantly deviates from its usual patterns.
  30. Out-of-pattern Transactions: This rule alerts when transactions are inconsistent with the customer’s established patterns, such as purchases from vendors they haven’t used before.
  31. Multiple Cards Associated with the Same Identity: This rule will alert when multiple cards are issued to the same person, which could be indicative of identity theft.
  32. Same Card Used with Different Merchants Simultaneously: This rule will alert when the same card is used simultaneously at different merchant locations.
  33. Credit Refunds: This rule will alert when there are frequent or large credit refunds to a card, which could indicate return fraud or ‘overpayment’ scams.
  34. Inactivity Followed by High Activity: This rule will alert when a period of card inactivity is followed by a surge of high-value transactions.
  35. Purchases of Gift Cards or Other Monetary Instruments: This rule alerts when the card is used frequently to purchase other cash-like monetary instruments, which could be a money laundering technique.
  36. Unusual Payments to Government Entities: This rule alerts when there are unusual payments to government entities, which could suggest an attempt to hide illicit funds.
  37. Transactions from Unrecognized Devices or IP addresses: This rule will alert when transactions are made from devices or IP addresses that are not recognized or commonly used by the customer.
  38. Duplicate Transactions: This rule alerts when two or more transactions have the same amount, date, and merchant, which could indicate a system error or fraud.
  39. Transactions in Non-Customer’s Regular Geo-Location: This rule alerts when the card is used in a location that is not part of the customer’s regular geographical pattern.
  40. Mismatch between Shipping and Billing Address: This rule alerts when the shipping address for a purchase does not match the billing address of the cardholder.
  41. Multiple Credit Cards Used on a Single Device/IP: This rule alerts when multiple cards are used on a single device or IP address, which could suggest card testing or fraudulent activity.

Again, these rules should be adapted and refined based on the specific requirements of the institution, local regulations, and the evolving risk environment. You can reach us at if you are interested in hiring us to build your compliance program and system.