Bitcoin in Mexico is developing fruitfully. However, there are conflicting views on whether the use of Bitcoin should be promoted or not. It seems that some regulators and financial institutions do not like the existence of Bitcoin very much, while the crypto community in Mexico is doing more and more for the development of this cryptocurrency. This article presents an overview of the challenges that Bitcoin implies for the government and banks, as opposed to the growing adoption of Bitcoin in Mexico.
The perspective of institutions on Bitcoin
Agustín Carstens, is the former governor of the Bank of Mexico and is currently general manager of the Bank for International Settlements (BIS), he is a bitcoin skeptic and cryptocurrencies in general. A couple of weeks ago, Bloomberg reported that Carstens warned Central Banks about the risk of creating native digital currencies. The critic argues that these actions could undermine financial stability and the creation of monetary policies.
In November 2018, the BIS published a document that reports the content of a conference by Agustín Carstens in Singapore. In this talk, the renowned Mexican economist argues that cryptocurrencies are unstable, that almost nobody uses them to buy things, they are highly prone to be used for illicit purposes, among other arguments.
The cryptocurrencies have serious defects of economic design. Cryptocurrencies do not scale like sovereign money, they are prone to congestion and the purpose of payments is problematic.
Carstens’ perspective on Bitcoin is shared by many financial institutions and government agencies, including the Bank of Mexico (2019) says that “It is considered convenient to maintain a healthy distance between virtual assets and the financial system”.
Satoshi Nakamoto created Bitcoin with the purpose of evading the presence of third parties in economic transactions. That is why Bitcoin represents a great challenge for Banks and regulators.
Bitcoin is a challenge for the government
Bitcoin is difficult to regulate by law, since it is hosted in a decentralized network. This network has a self-regulation system through the democratic participation of users from all over the world. This system is called Blockchain and is a new technology and in constant development.
When governments try to regulate Bitcoin, they are forced to apply very difficult procedures to carry out, to the extent that few countries have committed themselves to the task of regulating cryptocurrencies. Even the Bank of Mexico has failed to fulfill its task of determining which cryptocurrencies will be legal in Mexico.
Mexico is the first Latin American country to have a Fintech Law. This law was issued in March 2018 and it was the month before, on March 8, 2019 that Banco de México published updates of the Mexican Fintech Law.
The Fintech Law in Mexico is the product of much work by the authorities together with the Mexican community. This collaboration makes the Bitcoin ecosystem in Mexico stronger. The existence of a Fintech Law in Mexico has attracted a lot of external investment in the Crypto field, since companies are looking for a safe ground to invest.
“Thanks to the efforts of companies that want to do things well in Mexico, financial authorities such as Banxico, Sat and CNBV were able to create a law in Mexico. It is one of the few countries that has a law per se”, comments Alfonso Monroy, of Bitso at the Fintech Conference, 2018.
Bitcoin is a challenge for Banks
Cryptocurrencies compete with the services provided by banks, since they cover more or less the same needs; they facilitate money transfers and the store of value. Bitcoin represents an economic alternative for people. If people want to send money or store it, not only do they have the option to contract banking services, but they now have access to an open economy that aims to be more efficient and cheaper. With Bitcoin, people have a new financial alternative, have more options to save and send money.
This forces banks to innovate in a hurry, as they compete with a decentralized, agile technology that develops at a frenetic speed. In fact, on March 25, 2019 it was announced that Mexican banks have created an association to enable digital and momentary payments.
A platform called Cobro Digital (CoDi) has been created that enables payments with the cell phone through QR codes and Near Field Communication (NFC) technology. With this, immediate transfers can be made 24 hours a day, 365 days a year through the Interbank Electronic Payment System (SPEI). The initiative is promoted by the government agency CONDUCEF.
Introductory video to CoDi, by BBVA Bancomer
“These government actions aim to eradicate economic inequality and bring banking services to the entire population through the use of new technologies, have more efficient means of payment and make savings more effective”, reports CONDUSEF, government agency Mexican.
Adoption of Bitcoin in Mexico and the Community Perspective
While Bitcoin represents a challenge for governments and financial institutions, the experience of the community is very different. More and more people use Bitcoin in Mexico, more companies come to invest in the field of cryptocurrencies and invent new cases of Blockchain use with tokens. Although banks are developing new technologies and the government is implementing bans on crypto, the development of the Bitcoin ecosystem in Mexico does not stop.
Percentage of internet users who own cryptocurrencies by country
The percentage of internet users who own cryptocurrencies in Mexico is 5.9%. This represents the 16th place in the world and is higher than the percentage of users who have crypto in the United States, Japan and even China. This according to the Hootsuite study.
Mexico has been a fertile territory for the successful development of platforms that give strength to the adoption of Bitcoin. In a study on the Blockchain ecosystem in Mexico, published last month, 81 companies from different areas dedicated to working with Blockchain were identified, a technology that supports the existence of Bitcoin.
One of the platforms that is worth mentioning because of the great impact it has had on the adoption of Bitcoin in Mexico is Bitso. This Mexican exchange has facilitated the transaction of 11.95 million Mexican pesos in the last 24 hours, equivalent to a transaction volume of 162 BTC in one day.
The interesting parts about this tech
“It is very interesting how this technology comes to solve different problems, which are very specific in Latin America, we are very excited about the expansion part” He comments in an interview with Bitcoin.com.mx, Pablo González, Chief Design Officer (CDO) and Co-Founder of Bitso.
There are many other projects being developed in Mexico that facilitate the adoption of cryptocurrencies. For example, Bitcoin can be purchased through Oxxo, since it allows deposits to anchor a digital wallet. The number of Bitcoin ATMs in Mexico is growing, mainly thanks to the work of Cryptobuyer.
“The legal area in Mexico, is not a gray in which tomorrow you will find a surprise. It gives stability, certainty, you know that in this country you are allowed to obtain a license. (…) Yes the paperwork is complicated, but in the end, you do it and you get the permission”Matías Bari, CEO and Co-founder of Satoshitango, in an interview with bitcoin.com.mx.
Thanks to the stability of the Bitcoin ecosystem in Mexico, compared to other Latin American countries, many projects have chosen this country to expand, such as the Chilean Exchange Orionx and the Argentine Exchange Satoshitango.
Bitcoin is increasingly used to send remittances
It is very easy to send money from other countries to Mexico with Bitcoin and last week, Coinbase announced a system of international payments using XRP and USDC through which international shipments can be made free of charge thanks to a network of which Mexico is part.
There is no doubt that Mexico is a special case. The Bitcoin ecosystem has a very active development despite the fact that financial institutions and the government maintain a skeptical view of cryptocurrencies. The adoption of Bitcoin continues its course, the crypto community in Mexico is increasingly active and larger.
Also published on Medium.