- Bitso, Coinbase and Circle have launched new services that seek to serve the existing remittance market between Mexico and the United States.
- Mexico was the third largest recipient of remittances worldwide, after China and India.
- 99% went through wire transfers, while money orders and cash deposits seem to be a thing of the past.
Mexico is known for being an exporter of various products such as avocados, chili peppers, tomatoes, beer, red fruits and tequila, for example. but also labor and Mexican remittances from the United States are the largest in the continent and one of the largest in the world).
For this reason, the companies installed in the country want a slice and do their business: bitso, coinbase and Circle consider facing Western Union, the great dominator of the scene.
Crypto Firms Want to Tackle Remittances
The Covid pandemic has caused this situation to grow exponentially. As highlighted CoinDesk “Mexico was the third largest recipient of remittances worldwide, after China and India”.
President Andrés Manuel López Obrador pointed out that remittances from “Mexican migrants have been key to the country’s economic recovery after the pandemic”. Unlike other Latin American countries, Mexico has already overcome the pandemic downturn.
The Bank of Mexico stated that the amount of dollars sent to the country by national citizens living abroad reached $51.6 billion in 2021. This means an increase of 27% compared to last year.
The importance of stablecoins for sending remittances
99% went through wire transfers, while money orders and cash deposits seem to be a thing of the past. Cryptocurrencies want to take over this market.
Bitso, which is the largest centralized exchange in Mexico, already appears to be a major player in the business. From the first quarter of last year to this first quarter, their interventions quadrupled. Frida Vargas, head of business development at Bitso stressed that the company processed around $1.2 billion in remittances in 2020.
“Our main users are remittance companies, which use cryptotechnology to improve and facilitate the process of sending and collecting remittances”he explained.
For his part, Mohamed Elkastassi, director of strategy at Tribal Credit, pointed out that markets like Latin America will make a leap towards the use of stablecoins, which are perfect for remittances.
Stablecoins hold parity with the US dollar (usually), so there is no risk of volatility. If you send $100 dollars in Bitcoin, you can get $101, $100 or $99. If you send 100 USDT, to cite the most important in the market, it will be $100 dollars.
Tribal has a payment service for small and medium-sized businesses and has partnered with Bitso to enable the conversion of Mexican pesos to USDC. In turn, the Mexican exchange signed an agreement with Circle and launched Bitso Shift, this service allows you to change your dollars into stablecoins, send them to Mexico and collect them in Mexican pesos.. The service charges $12 for every $1,000 sent, and no collection fees.
According to a researcher from the Universidad Iberoamericana de Puebla, Mohamed Elkasstawi, stable currencies will have a privileged place in the lives of Mexicans:
“In the future, migrant workers will be paid in stablecoins and merchants will accept them as payment”.
In addition to Bitso and Tribal, coinbase also offers a payment service in Mexico. this is cash and has a presence in 37,000 locations, including more than 20,000 Oxxo branches. In turn, it allows its clients to convert and invest their balance in more than 100 digital assets. The value of the service? Half of what Western Union demands, which charges between $8 and $37.
Remittances are essential for the growth of the entire Mexican economy and cryptocurrencies can play a determining role.
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