- Tether has launched the MXNT stablecoin, which will be backed by the Mexican peso.
- Mexico is one of the main countries in Latin America that receives an important flow of remittances.
- Cryptocurrencies, especially stablecoins, have become a particularly useful means of sending remittances by reducing costs and obstacles.
A large part of stablecoins are pegged 1:1 to the US dollar, and the reason is associated with the trust that the world has placed in this fiat currency.
The relevance and power that the United States currency has acquired over the years is not a mystery to anyone. After World War II, the US dollar led the market as a currency, and to this day, it remains so despite, even, the inflation that the country is experiencing.
For this reason, many stablecoins have chosen the US dollar as their backing currency.as they know that the market trusts the US dollar as a method of payment.
However, there are crypto companies that have opted to create stablecoins linked to other local currencies. Example of this is Tetherthat In addition to owning USDT, stablecoin backed by the US dollar and the most important stablecoin by market capitalization, it also owns a EURT, token pegged to the Euro; and the CNHT, pegged to the Chinese yuan.
Now Tether has decided to increase its offer in the market by issuing the MXNT tokens pegged to the Mexican pesothat is, a new stablecoin that, instead of being backed by the US dollar, its value will be linked to the Mexican peso.
Stablecoin backed by the Mexican peso
Perhaps for some the question is: why is Tether launching a stablecoin backed by the Mexican peso?
It is no mystery to anyone that stablecoins, and cryptocurrencies in general, have become relevant for countries such as Venezuela, Mexico, Colombia, Brazil or Chile as a tool for sending remittances.
In the end, cryptocurrencies remove intermediaries (governments and financial institutions) from the equation, so Sending remittances with cryptocurrencies implies low costs, speed and, of course, privacy.
Therefore, having a multimillion-dollar flow of remittances along with limitations and obstacles to transfer money through the traditional system, it is almost obvious that Tether had to execute the launch of MXNT.
Bearing this in mind, it is understandable why Paolo Ardoino, CTO of Tether, explained in the statement they have seen a “increase in the use of cryptocurrencies in Latin America during the last year that has made it evident that we need to expand our offers“, consequently, “a stablecoin pegged to the Mexican peso will provide a store of value for those in emerging markets and in particular Mexico”.
Tether justified the launch of MXNT given that a report from Triple A, a crypto payments company, assured that 40% of Mexican companies seek to adopt Blockchain and cryptocurrencies in some way; with most of it focused on crypto.
“MXNT can minimize volatility for those looking to convert their assets and investments from fiat to digital currencies.”assured Ardoino and therefore, Tether has seen the potential in Mexico to become the “next center of cryptocurrencies in Latin America”.
According to Ardoino, Tether is looking to work with local banks to offer “other flavors of Tether” and thereby connect more people to USDT and thus to Bitcoin.
“The launch of MXNT will provide a testing ground for the onboarding of new users in the Latin American market and will pave the way for the launch of future fiat currencies in the region.”, reads the press release.
The press release assured that, at least Initially, MXNT will be available on three blockchains: Ethereum, Tron and Polygon and MXNT is expected to start trading on Bitfinex next week.
Mexico as a niche for cryptocurrencies
The economy in Latin America has been characterized over the years by instability and uncertainty. Certainly, each country in the region has fundamentally different economic systems. However, most have in common a high receipt of remittances.
Remittances are earnings that emigrants send back to their country of origin as a way of contributing to their families.
So much so, according to him Inter-American Development Banksending remittances to Latin America and the Caribbean set a record in 2021. The number of remittances sent was $128 billion US dollars. In fact, according to IDB analysis, Mexico saw an increase of approximately 27% in the amount of remittances received in 2021 compared to the previous year.
The IDB concludes that the growth rate of remittances “was 8.4 percentage points higher than the estimated growth rate of GDP per capita of Mexicans in the year, which shows a relative improvement in the income of Mexican families that received remittances compared to those that do not benefit from these flows”.
This context of the economy of Mexico and other countries in Latin America allows us to approach the possible reason why Tether decides to launch a stablecoin with the Mexican peso.
Tether, under analysis of all
Tether is a company that has long been the subject of speculation, essentially due to a lack of clarity and certainty about the reserves backing USDT.
In fact, as reported on Bitcoin Mexico, earlier in the month USDT briefly lost its peg to the US dollar as a result of the instability caused by the Terra UST crisis.
After what happened, Tether released a guarantee report for the first quarter of 2022, where the community was provided with certain details about how the reserves were made up. And so it is not surprising that how MXNT will be backed is not 100% clear.
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