Mexico is the second-largest recipient of remittances in the world, according to 2021 World Bank statistics. Remittances to the nation jumped to a rec
Mexico is the second-largest recipient of remittances in the world, according to 2021 World Bank statistics. Remittances to the nation jumped to a record $5.3 billion in July, which is a 16.5% increase year-over-year compared to the same period last year. The steady growth presents myriad opportunities for fintech companies.
Not surprisingly, droves of crypto companies are setting up shop in Mexico to claim a share of the burgeoning remittance market.
Over the past year alone, about half a dozen crypto giants, including Coinbase, have set up operations in the country.
In February, Coinbase unveiled a crypto transfer service tailored to United States-based clients looking to send crypto remittances to Mexico. The product enabled recipients in Mexico to withdraw their money in pesos.
Other companies have since joined the foray. In August, the Malaysia-based Belfrics digital currency exchange announced plans to open crypto transfer operations in Mexico. According to the published communique, the firm will start by launching blockchain wallet and remittance service solutions.
Another notable company that is jostling for a share of the Mexican crypto remittance market is Tether. In May, the crypto company launched the MXNT stablecoin, which is pegged to the Mexican peso. According to the enterprise, the collateralized digital currency will help customers to navigate volatility and use cryptocurrencies as a store of value.
Besides the new entrants, local Mexican crypto companies such as Bitso, which is one of the largest crypto exchanges in the Latin American nation, are already making moves to enhance their reach in an increasingly competitive market.
In November 2021, the Mexican firm established an alliance with U.S.-based Circle Solutions. The collaboration allowed the agency to use Circle’s payment system to facilitate U.S.-to-Mexico crypto remittances.
Cointelegraph had the opportunity to speak with Eduardo Cruz, head of business operations and enterprise solutions at Bitso, about the factors driving the crypto remittance trend in Mexico. He cited high bank transaction costs, slow settlement times and the lack of access to banking facilities as some of the factors pushing the masses toward crypto remittances.
He also highlighted recent alliances that have helped Mexican crypto companies bring crypto remittance services closer to nationals around the world, thereby boosting their adoption.
“For example, Bitso’s clients such as Africhange, which recently integrated Canada–Mexico crypto-powered remittance services to Bitso, and Everest, which enables remittances from the United States, Europe and Singapore into Mexico, are offering a cheaper and faster way to send money to Mexico,” he said.
Factors driving the Mexican crypto remittance sector
One of the biggest factors driving the Mexican crypto remittance sector today is the huge Mexican population residing in the diaspora. Presently, the U.S. and Canada have the highest number of Mexican immigrants.
According to data released by the U.S. Census Bureau in 2020, there are approximately 62.1 million Hispanic people residing in the U.S. today, with Mexicans comprising 61.6% of this population.
Going by 2021 numbers, money sent to Mexico from the U.S. accounted for about 94.9% of all remittances, while Mexicans residing in Canada sent $231 million in the second quarter of 2022.
In a nutshell, the rising number of Mexicans migrating to the U.S. and Canada is pushing remittances to new levels, and the high demand is spilling over to the crypto payments industry.
The decline of the Mexican peso and the emergence of a strong dollar have also contributed to the spike in remittances over the past couple of years.
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This phenomenon has occurred in previous crises, such as the 2008 financial crisis, which plunged the Mexican economy into turmoil. In times like this, Mexican institutions and investors usually tend to seek refuge in the greenback, which typically has a higher buying power.
In March 2020, when coronavirus lockdowns began, the U.S. dollar’s purchasing power jumped by approximately 30% in Mexico. At the same time, the average remittance transfer to Mexico increased from $315 to $343.
Today, the availability of dollar-pegged cryptocurrencies allows Mexicans living in the diaspora to leverage the heightened buying power of the USD to make investments and purchases in their home country, hence the higher remittance rates.
Greater convenience
Blockchain technology eliminates third-party mediators from transaction processes, which leads to lower transaction costs and less time used when undertaking remittance transactions.
Cointelegraph caught up with Structure.fi president and co-founder Bryan Hernandez to discuss the impact of these factors on the Mexican remittance market. His company operates a mobile trading platform that gives investors exposure to traditional and crypto financial…
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