At the same time as remittances have been on the rise, Mexico has gained attention for its growing embrace of cryptocurrencies.
Crypto ownership in Mexico is around 2.5% of its population (totaling 3.1 million people), according to crypto payment service Triple-A. That does not put it among the top countries by this measure, which includes Ukraine (12.73%), Russia (11.91%), Venezuela (10.34%), and Kenya (8.52%).
However, Mexico’s locally-founded crypto exchange, called Bitso, has increased to more than 2 million users, most of whom are based in the country. Recent research from the Ponemon Institute found that 40% of Mexican companies were looking to implement some kind of Blockchain-based technology, and 71% of these were focused on cryptocurrency. Analysts have suggested the country may follow El Salvador in making Bitcoin legal tender.
A better transfer option?
Citizens have cited “onerous banking restrictions” in Mexico (introduced in recent years to combat crime and money laundering but impacting regular citizens too) as one of the reasons for crypto’s appeal, particularly when buying goods online.
“Difficulties transferring money by bank to and from Mexico mean many people have to use money transfer services and websites, which can come with high usage fees and slow transaction times,” said Jonathan Merry, CEO of MoneyTransfers.com.
“There are pros and cons to transferring money using cryptocurrency, and some of the pros include lower transaction fees – with the right provider – and super-fast transactions that can happen at any time. Combined with the rise of non-bank institutions for sending money into Mexico and the fact that Mexico is very much a country to watch on the global crypto scene, we are sure to see crypto’s usage increase for remittances,” Merry said.
One of the world’s biggest crypto exchange platforms, Coinbase, has launched a pilot scheme targeting this market. It will overcome some of the issues with technological barriers by giving the recipients of transfers a redemption code to cash out at 37,000 retail locations throughout Mexico. It has also pledged to be cheaper than traditional remittance services and process transactions in a matter of seconds.
“The Coinbase scheme will definitely be attractive to people. One downside of sending remittances through crypto is that whoever is on the other end may not have the extensive technological know-how. Having somewhere they can take a code to exchange for fiat money will take some of the stress away,” Merry said.
“However, anyone looking to transfer remittances through crypto should be very cautious of the fact that currency values can be hugely volatile within a day, so there is a risk of losing money on the exchange.
“They should also note that transactions are irreversible, and depending on the service they use, it may be difficult to access customer support. Only those who have researched their options and feel confident with the service's usability should attempt to send remittances or other types of a money transfer using crypto,” he added.