Remittances, inflation and exchange rate volatility have influenced Mexicans to increasingly adopt the use of cryptocurrencies, according to Dan Cartolin, Enterprise Account Executive at the blockchain specialist platform Chainalysis.
In an interview, he commented that the adoption of cryptocurrency in Mexico has experienced substantial growth in the last five years and that the country has made significant progress.
“This upward trajectory indicates a notable increase in both transaction volume and user adoption within the Mexican cryptocurrency market,” he noted.
The manager indicated that “Mexico is an important country” to take into account for its adoption of cryptocurrency-based remittances, as this flow represents an important area of finance that supporters of such assets have long promoted as an area where technology can make things faster and cheaper.
“Mexico is the second largest recipient of remittances in the world, with an estimated annual flow of $61 billion from abroad, mostly from the United States. The growth of remittance transactions with cryptoassets is the main factor in the adoption of crypto in Mexico,” highlighted the specialist,
Additionally, he noted that greater adoption is being seen from traditional Mexican companies that use stablecoins as a payment vehicle for cross-border b2b payments.
“Although there is currently no clear regulation, this use case shows a clear appetite for the payment rails of blockchain technology,” he noted.
The specialist added that inflation and the exchange rate also directly influence interest in cryptocurrencies in many countries, especially in Mexico.
He noted that during periods of high inflation or currency devaluation, cryptocurrencies are perceived as an alternative to protect purchasing power, preserve value and make transactions more efficient, for example, in the case of remittances.
“There are particularly strong examples of this correlation in places like Venezuela and Türkiye, which have experienced extraordinarily high levels of inflation in recent years. “It is logical that Mexico is subject to the same dynamic, with cryptocurrencies emerging as a clear hedge against currency weakening in times of economic uncertainty,” he said.
The exchange rate in Mexico has fluctuated in recent years, prior to the Covid-19 pandemic, the peso was quoted around 18.76 pesos per dollar.
During the health crisis, the Mexican currency reached a value of up to 24 pesos per greenback, accumulating a depreciation of 5% in 2020.
Subsequently, the national currency began an appreciation trend that would little by little reduce its distance with the dollar, until reaching 16.40 pesos per US bill in May 2024.
Currently, the Mexican peso is at a level of 20.61 pesos per dollar, in anticipation of the uncertainty surrounding the Mexican economy after Donald Trump’s victory in the presidential elections.
On the other hand, inflation is outside the target range of Banco de México (Banxico), which is 3% plus/minus one percentage point. It is currently at an annual rate of 4.76%, according to data from the National Institute of Statistics and Geography (Inegi).
In the long term, Cartolin said that on a global scale, the sector is very lively: as the total market capitalization is in a bullish phase and he exemplified that bitcoin is bouncing from all-time highs.
“But regardless of the price, we focus on the transfer of value and we are seeing an upward trend in overall transfer activity,” said the specialist.
Cartolin’s comments come at a time when the world’s most famous cryptocurrency, bitcoin, surpassed its all-time high, reaching a value of $90,000 per unit. Its previous maximum price was $68,000, during 2021.
More transactions, more danger
On the other hand, the Chainalysis executive mentioned that as cryptocurrencies grow and become intertwined with the global economy, they are increasingly used “by both good and bad actors.”
He explained that a report from the company he works for noted that scammers, for the most part, continue to move away from broad-based ponzi schemes toward more targeted campaigns like scams.
“As the general use of stablecoins has increased, so has their illicit use,” he noted.
He also detailed that stablecoins now represent the majority of all illicit transaction volume driven by transactions with sanctioned services and services in comprehensively sanctioned jurisdictions, such as some Middle Eastern countries.
“Approximately US$1 billion has been lost to scams leveraging consent phishing since May 2021,” he lamented.
He added that after identifying more illicit addresses, Chainalysis data now reveals that more than US$2.7 billion has been lost to consent phishing, showing that it is a much larger problem than previously known.
“However, the inherent transparency of the blockchain, along with its advanced analytics, offers a number of opportunities for investigation, asset recovery and crime prevention,” he said.
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