Earlier this year, Mexico became one of the first countries in Latin America to regulate financial technology, including blockchain and cryptocurrencies. The Mexican Congress officially recognized cryptocurrencies as digital assets – but not as currency – and set up rules to control exchanges to prevent corruption and money laundering. The law puts the Mexican Central Bank in charge of monitoring companies working with cryptocurrencies.
The Mexican government as a whole is also investigating multiple uses for the blockchain to increase transparency, reduce corruption, and prevent illegal activity throughout the country. Mexico currently ranks 135th out of 180 on the global corruption index, according to Transparency International.
In early April 2018, the Mexican government released news that they are currently developing a project called Blockchain HACKMX that uses the blockchain to track and validate bids for public contracts. This system, proposed by a group of university graduates last year, will increase transparency in the federal hiring process and help organize the post-contract auditing process.
Former Mexican President Vicente Fox is personally working on a project that integrates blockchain technology with local agricultural knowledge. Fox sees applications for blockchain technology in reducing bribery and corruption within the Mexican government and is currently educating himself about the blockchain to help bring the technology to Mexico. He attended the global Blockchain Economic Forum in Singapore in February 2018 to take the first steps into learning how to apply the technology in his home country.
Furthermore, in a country where remittances can occasionally boost GDP more than oil revenue, cryptocurrency could become a significant opportunity for families that want to avoid international transaction fees. Since cryptocurrencies operate on a decentralized system, there is no need to go through costly intermediaries to send remittances from the US to Mexico. Mexico’s two most prominent cryptocurrency exchange startups, Bitso and Volabit, are helping coordinate these remittances through simple-to-use apps that lower the cryptocurrency learning curve.
There are dozens more possible applications for blockchain and cryptocurrencies in Mexico, where more than 80 million people do not have access to formal banking services. Companies like Bankcoin.global, a project by the Universidad Autónoma de Baja California Sur, are piloting smart contracts and cryptocurrency e-commerce in Mexico.
As Mexico’s private and public sectors catch on to the potential of blockchain technology, Blockchain Academy Mexico, and Telefonica Mexico have created courses to teach blockchain development starting from the beginner level.
Lack of trained talent is still one of the main factors holding Mexico back from becoming a regional power in blockchain development. A recent study by various tech companies working in Mexico ranks Mexico’s blockchain ecosystem at just 3/10 on the global scale, primarily due to the lack of talent.
Although Mexico graduates thousands of talented engineers every year, the blockchain industry, in particular, suffers from large-scale brain drain to the United States, where blockchain is more advanced. Nonetheless, international software companies like IBM and Softteck are bullish on the Mexican government’s new interest in integrating blockchain technology for use in smart contracts and other projects.
Beyond the government, Mexico’s poorly-regulated auto insurance industry has also caught on to the potential value of blockchain for regulations. The Mexican Association of Insurers is exploring blockchain solutions to transparently validate insurance policies, save the government time, and improve compliance.
In the banking sector, Santander has reportedly invested around US$800M in Mexico to develop blockchain technologies that will strengthen security and integrate cryptocurrency exchange into the financial system.
Although blockchain technologies are just beginning to develop in Mexico, both the private and public sector are aware of the blockchain’s potential to improve transparency, streamline remittance payments, and organize regulations. In fact, despite low levels of cryptocurrency adoption, Mexico has 130 bitcoin exchanges, which is relatively high for Mexico’s income level.
Given the Mexican government’s demonstrated interest in adopting blockchain technologies across several sectors, Mexico may become a regional blockchain leader over the next decade.