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Could Mexico Become the Next Country to Legalize Bitcoin?

Bitcoin World

5 min read

Over the past decade, Bitcoin adoption has grown at an impressive pace with some regions seeing adoption deeper than others. In Latin AmericaFor example, cryptocurrency has been widely adopted due to the volatility of local currencies and lack of trust in financial institutions.

Recently, Mexican Senator Indira Kempis, who has never failed to show her attraction to cryptocurrencies, presented a bill to Congress aimed at legalizing bitcoin in the country. Although his initiative is strongly criticized by the opposition, the debate is still open within Mexican society as a whole. Some are enthusiastic about this idea while others strongly reject the idea of bitcoin becoming a legal national currency.

Some predict that Mexico could become the next country to adopt bitcoin, becoming the second in the region after El Salvador.

Current context of Bitcoin in Mexico

In Mexico, Bitcoin adoption is still in its early stages, but it is growing strongly. According to a study by Cambridge Center for Alternative Finance, "cryptoasset adoption is relatively high in Mexico, especially for remittances, which has increased the popularity of mining, placing Mexico among the top four countries with miners in the region."

Many opportunities in this sector seem to be open to Mexicans. For example, the billionaire and pro-bitcoin businessman Ricardo salinas considered installing mining farms near the Domo San Pedro geothermal power plant. At present, the project has not been realized.

It is especially young people who seem to be more attracted to Bitcoin with 42% of crypto-holders being between 18 and 34 years old. According to a survey of The report of Statista, 6 in 10 respondents aged 18 to 24 in Mexico reported using or owning cryptocurrencies in 2022. Participants reported owning a variety of cryptocurrencies including bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), and Cardano (ADA) mainly.

Additionally, Mexico is home to several cryptocurrency exchanges, such as Bitso for example, which recently raised $250 million in a Series C funding round.

On the map of Btcmaps.org, it can be seen that there are also several Bitcoin ATMs in the country, which allow users to easily buy and sell cryptocurrencies.

Factors influencing the adoption of Bitcoin in Mexico

Several factors are influencing the adoption of Bitcoin in Mexico. The first is economic instability. As in other Latin American countries likeArgentina, many Mexicans are turning to Bitcoin as a form of protection against inflation and the devaluation of the local currency.

Likewise, a key factor is that bitcoin offers an alternative to traditional monetary systems, which are often subject to manipulation and restrictions imposed by governments and financial institutions.

Another factor is financial inclusion. According to the World Bank, approximately 63% of adults in Mexico do not have a bank account. Bitcoin offers a solution to this problem, as it does not require a bank account and is accessible to everyone, regardless of their income level.

Finally, Bitcoin adoption in Mexico is also influenced by regulatory developments. In 2018, Mexico adopted the “ Ley Fintech", a law that regulates technology-based financial institutions and explicitly and officially recognizes cryptocurrencies as a form of electronic payment.

The Potential Benefits of Bitcoin Adoption in Mexico

Bitcoin adoption could have several benefits for Mexico. First, it could help improve the financial inclusion of a large part of the Mexican population that does not have access to traditional banking services. Bitcoin could help bridge this gap by providing an alternative to traditional banking services.

Second, Bitcoin could help stabilize the Mexican economy. The Mexican peso is subject to inflation and devaluation, which leads to situations of economic instability while Bitcoin, on the other hand, has a limited supply and is not subject to inflation. However, unlike other currencies in the region, inflation in Mexico is rather low (around 4% for the year 2023), which does not offer a real argument for Bitcoin in this specific context.

Furthermore, the adoption of Bitcoin could help stimulate technological innovation in Mexico. Many Mexican companies are already exploring the possibilities offered by blockchain and Bitcoin. The adoption of Bitcoin could encourage more companies to explore this technology and create new jobs, in order to boost the country's economic growth.

Indeed, Bitcoin could help attract foreign investments to Mexico, particularly those from the region. Investors are increasingly interested in cryptocurrencies and blockchain technology, and a favorable regulatory environment could encourage more investors to invest in Mexican companies.

Potential Challenges to Bitcoin Adoption in Mexico

Despite the potential benefits, Bitcoin adoption in Mexico also presents challenges. One of the main challenges is the volatility of Bitcoin. The price of Bitcoin can fluctuate significantly within a day, which may deter some people from using it as currency. However, it is important to remember that the volatility of bitcoin tends to decrease over time. This could be a criticism that will no longer be valid in the long term.

Another challenge is the lack of clear regulations. Although Mexico adopted Ley Fintech in 2018, the legal framework is more relevant to fintech and financial companies. Mexican law states that cryptocurrencies are a form of electronic payment. However, the regulation of Bitcoin in Mexico remains a matter of debate. Some argue for stronger regulations to protect consumers and prevent illegal activities, while others argue that regulations should be flexible enough to encourage innovation and adoption.

Finally, there is the challenge of education. Many people in Mexico do not understand how Bitcoin and blockchain work. For Bitcoin adoption to increase, it is crucial to educate the population about the benefits and risks of using cryptocurrencies. According to the bitcoin community, the country lacks educational initiatives such as Mi Primer Bitcoin in El Salvador which offers courses on bitcoin to students.

Final Word: Will Mexico be the next country to adopt Bitcoin?

It is difficult to say for sure whether Mexico will be the next country to adopt Bitcoin. However, there are several encouraging signs. More and more Mexicans are starting to use Bitcoin and other cryptocurrencies. In addition, the Mexican government through Senator Indira Kempis has shown an openness towards Bitcoin. This is supported by the fact that other politicians in the region are showing similar interest such as the populist Javier Milei in Argentina.

Despite significant challenges, it is clear that interest in Bitcoin and other cryptocurrencies will continue to grow in Mexico and Latin America. Now, only time will tell if Mexico will become a new bitcoin welcoming country. But one thing is certain: the potential is there, and it is exciting to see how the country will exploit this potential in the future.

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Note: There is no financial advice in this or any other article on this site. Be responsible with your investments and only invest as much as you are willing to lose.

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