Bitco is Making More than Just a Dent on International Relations
Over the course of 2020, Mexico amassed around a total of $40 billion, which is roughly 4% of its GDP (The Fed). While $40 billion is a lot of money, Mexico’s revenue in remittance has actually reached all-time lows ever since the COVID-19 pandemic as Mexican migrants are enduring greater financial hardships.
In efforts to make the remittance process easier and more efficient, Bitco, a digital financing platform, has developed a cryptocurrency to enable exchanges between pesos and USD. Despite Mexico’s adamancy towards cryptocurrencies, Daniel Vogel, the CEO and co-founder of Bitso, see’s Bitso’s pot
ential in transforming the remittance process for Mexican freelancers, workers, and families in the U.S. Currently, Bitco operates through Bridge21, a U.S.-based financial company with similar initiatives. Bitco also partnered with Circle, which has transactional systems based in the U.S. 's cryptocurrency, USDC stablecoin. Stablecoins, as opposed to regular cryptocurrencies, are backed by governments as they are designed to be pegged to a nation’s traditional currency and regulated by the central government more so as usual.
There are many benefits to a cryptocurrency-based approach, such as faster remittances. The process of exchanging money across the U.S.-Mexico border is very tedious and involves numerous transactional fees. Bitco, on the other hand, eliminates those fees and enables peer-two-peer transactions from essentially any mobile device lying around. (And trust me, government-sponsored institutions can always move slower. Just look at the DMV). This approach also introduces price competition to a business largely dominated by big government-sponsored companies. People who aren’t registered into bank accounts can still use Bitco’s transference system as their software is decentralized.
While the benefits of Bitco’s platform sound promising, the Mexican government hasn’t budged in its strong opposition against cryptocurrencies. Mexican financial institutions that attempt to use digital currencies have been threatened with sanctions by the Comisión nacional Bancaria y de Valores (CNBV). The Group of Seven (G7), consisting of Canada, France, Germany, Italy, Japan, the UK, and the U.S., follow Mexico’s skeptical stance. The volatility of cryptocurrencies has the potential to destabilize international financial systems. Even ‘global stablecoins’ that have been endorsed by China and the European Union draw scrutiny from global leaders. As seen in areas such as the Middle East, cryptocurrencies are susceptible to money laundering given the lack of government regulation. The ability to bypass central banks may hasten the process of transactions but creates immense security risks.
The biggest obstacle against crypto-expansion are the countless unanswered questions that arise when considering cryptocurrencies. While Bitco may be able to strengthen pre-existing institutions, the lack of legislation or international consensus makes endorsing it highly unlikely. If the U.S. and Mexico endorsed Bitco, perhaps other countries will view that as collusion or even a declaration of economic war similar to that of a sanction!
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