How Significant is Bitcoin Adoption in Mexico?
Get the full picture of exchanges, regulatory framework, remittances market, payments adoption, mining scene, and Bitcoin communities and education efforts.
Mexico has an enormous economy and a growing tech sector, but how significant is Bitcoin adoption?
Suppose you’re thinking of moving here as a Bitcoiner, launching a Bitcoin project here, or already live here and want to know more about the adoption status. In that case, the last thing you want is to spend tons of hours of research across the internet to find an answer to this question.
So how’s Bitcoin being adopted in Mexico as of early 2023? There’s a cryptocurrency exchange scene with over a million users dominated by Bitso. It is estimated that cryptocurrency transactions facilitate at least 3.5% of the remittance market of this country. Finally, there’s little adoption on the merchant payments front and the mining industry, but the positive trends and vast opportunities make me optimistic that this will grow over time.
If you want to know more about the exchange market through regulated platforms, p2p exchanges, ATMs, the regulatory framework, the remittances market, the tourism-fueled payments adoption, the challenging but opportunistic Bitcoin mining scene, and the Bitcoin communities and educational efforts, keep reading because I will break all of that down in this article.
The Mexican Cryptocurrency Exchange Scene
When looking at a country’s adoption of Bitcoin, we must begin at the source: the cryptocurrency exchanges, where people buy and sell. There are a few different methods of acquiring Bitcoin: Trading Exchanges, P2P Exchanges, and ATMs.
Only a Few Regulated Trading Exchanges
The undeniable market leader in the country and the region remains Bitso, with over a million users in Mexico. They have been operating since 2015 and have raised $315M with a market valuation of $2.2B, making it the only unicorn of the region in the cryptocurrency industry. They have sponsored major mainstream events like the National Soccer Team at FIFA 2022 in Qatar, increasing brand awareness throughout the country.
There are only four more competitors as trading exchanges that you can use with national banking funding methods, listed here :
Volabit (previously Coincove): many cryptocurrencies, launched in 2014 in Mexico.
Ripio: many cryptocurrencies, founded in 2013 in Argentina, six countries, and has 3 million users.
Mercado Pago: launched Bitcoin & Ethereum trading in late 2022 (Spanish news announcement), a fintech subsidiary of MercadoLibre, Latin America’s largest e-commerce website with 150 million users.
Domitai: many cryptocurrencies, launched in 2017 in Mexico.
Tauros used to be fully operational but has since closed up new sign-ups and is preparing to relaunch later this year. They will offer cryptocurrency trading, Lightning Network deposits and withdrawals, and USDC accounts with MXN (Mexican Peso) deposits and withdrawals.
Buying Bitcoin through P2P Exchanges
Another popular method to buy Bitcoin in Mexico is through P2P trading exchanges like Paxful and Binance. These companies don’t have to be regulated in the country since they only provide a platform for buyers and sellers to communicate and execute their trades. In November 2022, Binance made news by hiring a National Manager for the country, Frida Vargas. It’s expected they will complete the regulatory process to become a fully operating trading exchange in the country.
ATMs for Cash Deals
Given Mexico’s cash usage rate for merchant payments are 41%, a high for its region; it’s only natural that many retail investors will prefer ATMs to acquire Bitcoin. However, the rollout has been pretty slow, and there are only 47 ATMs in the country. They are only found in the biggest cities of Tijuana, Monterrey, Culiacan, Guadalajara, Aguascalientes, Queretaro, Mexico City, Puebla, and the Quintana Roo’s touristic destinations Cancun, Tulum, Playa del Carmen, and Cozumel.
It’s rumored and expected that many other exchanges will launch in Mexico over the next year or two; the regulatory process makes this relatively long, which we’ll be looking at now.
The Country’s Regulatory Framework
Many people believe that Latin America, and Mexico mainly, are economically free markets. This is true in three ways: many operate outside of the law, corruption is a tool to operate uninterruptedly, and government enforcement lacks resources and efficiency.
This couldn’t be further from the truth in the formal economy. Mexico is stringent regulatory-wise and implements red tape to benefit those closer to the political power. This applies to the cryptocurrency exchange space as much as to any other financial sector. Let’s take a look at how trading exchanges are regulated here.
The Bank of Mexico Crypto Rule
On June 2021, Banxico, the Central Bank of Mexico, imposed a ruling on all financial institutions barring them from using cryptocurrencies, except for internal operations. This means that no nationally regulated financial corporation is allowed to exchange Bitcoin with investors, but like it’s always the case with Mexican regulations, there’s a loophole.
The Fintech License Law
In September 2018, the government’s financial regulators announced a new legal framework for all non-banking financial companies: The Fintech Law. Two types of FinTech institutions can operate in Mexico under this framework: Payment Processors and Collective Financing (Credit). Cryptocurrency exchanges would fit the first category.
How is it possible that Bitso and other companies can serve the Mexican public even though there’s a ruling blocking them from doing so? They can split their operations with a nationally regulated corporation under the Fintech License law that serves as a payment processor for a second offshore corporation that operates the cryptocurrency exchange. The first company is a banking payments bridge between the public and the foreign exchange.
There aren’t many limits to how foreign companies can operate virtually in Mexico, allowing this loophole. However, this process isn’t easy; it incurs tens of thousands of dollars in legal costs, requires preestablished contacts with regulators, and can take years. There are only 37 approved Fintech companies in Mexico, and over a hundred more are waiting for their license, some for over two years.
Indira Kempis's Bitcoin Legal Tender Efforts
Some politicians say they want to make it easier for Bitcoin adoption in Mexico, using El Salvador as a model. Indira Kempis, from the Citizens Movement Party, is the most outspoken one. She has submitted many bills on this topic, one in June 2022 that would make Bitcoin legal tender, but with no support from other legislators or any success.
Let’s now look at another use case of Bitcoin for Mexico and its current state, remittances.
The Mexican Remittances Adoption
Mexico has always been a top recipient of remittances, and every month and year, growth continues. In 2022, it surpassed China to become the second-largest recipient of remittances in the world, only after India ($100B), with a total of $58.4B received, a 13.3% increase over 2021. The vast majority of this income comes from the United States.
This is an enormous market that cryptocurrency exchanges have been tackling for a few years already. Let’s look at what Bitso and Coinbase are currently doing to facilitate these transactions and then at new projects like Yopaki, which will launch next year to solve this problem in a Bitcoin-first manner.
Bitso Remittance Operation and Coinbase Cash-out Program
In November 2021, Bitso partnered with Circle to offer international wire payments to its retail and business customers in 80 countries. Its main target transactional market was remittances from the United States to Mexico. In the first half of 2022, Bitso had already processed over a billion dollars in remittances volume, 3.5% of the total remittances received in the country.
With significant market opportunities comes competition. Coinbase launched in February 2022 a cash-out service in Mexico to facilitate remittances. Americans can send money to their Mexican family through Coinbase to withdraw cash at more than 37,000 locations nationwide, including the national convenience store, Oxxo. It has partnered with known remittances operator Remitly to use its established network locations.
New project on the Horizon: Yopaki
It’s been known across the Bitcoin communities in the country that Bitso lacks in some areas. First, it offers and markets many cryptocurrencies that are blatant scams, like XRP. Some also claim not to be satisfied with their customer service, poor investor education efforts, and little focus on Bitcoin over other cryptocurrencies. Many want an alternative, and there’s one in the making that could answer their call.
Yopaki is a startup launched in 2023 with offices in Austin, Texas, and Mexico City. It aims to be a Bitcoin-only exchange and remittance provider for the unbanked communities in Mexico and their families in the USA. The founder, Francisco Chavarria, is a good friend of mine and someone I greatly respect. You can sign-up for their waiting list here. DCA purchases and Lightning deposits and withdrawals are ways Yopaki aims to provide an improved user experience.
Now that we’ve covered speculation through exchanges and international transfers through remittances as Bitcoin use cases in this country let’s look at merchant payment adoption.
Barely any Merchant Adoption
Mexico has a very stable national currency, a liquid banking system, high cash usage, and relatively high adoption of banking cards. It makes this country very different from counterparts in its regions like Argentina, which has a weak currency, or El Salvador, which has minimal banking adoption and uses a foreign currency, USD.
Still, there are some examples of merchant adoption in Mexico. We’ll cover the most interesting ones ranging from influential brands like Elektra (retail store) and Rappi (delivery application) to small family restaurants or hotels. There are also real estate transactions that have closed in Bitcoin, and finally, Narcotrafficking Cartels have used it for money-laundering purposes.
Major Brand Adoption: Elektra, Rappi, Contender
Both Mexicans and Bitcoiners know the third-richest man in the country by his name, Ricardo Salinas. He’s a conglomerate magnate, owning multiple enterprises in public television (TV Azteca), banking (Banco Azteca), and retail, Elektra, which accepts Bitcoin as payment for their products through Bitpay. . He has announced that he wishes to turn his bank into the first national Bitcoin bank but has been shut down by the Central Bank right after making that statement.
In April 2022, Rappi launched Bitcoin as a form of payment in their delivery application, allowing consumers to purchase a restaurant meal, groceries, alcohol, or even a Bluetooth speaker with Sats. This was launched as a pilot program in Mexico and seems closed as of the 27th of February, 2023, because I can’t find the option on my application.
In the city I reside, Quéretaro, there is a GoKart place called Contender where you can pay in Bitcoin. GICSA Group, the owner, offers this too in the three other locations in Pachuca, Puebla, and Cuernava. They’ve partnered with Bitso to process the payments. I also found it interesting that in the state of Tamaulipas, near the American border, Grupo Alpro distributes medical equipment and has announced that 5% of its sales are in Bitcoin.
Tourists and Expats as a Source of Demand
Many tourists and expats, like me, have Bitcoin and want to buy products and services with it if convenient. This phenomenon is just starting and is expected to grow over the next few years, if not decades. I’ll be sharing three examples to illustrate the situation.
About 504 years ago, Hernan Cortez embarked on a journey to conquer the territory of Mexico in the name of the Spanish crown, through Veracruz. In the present historical center of this tourist destination, you can find Taqueria Cinco La del Centro, a restaurant that sells tacos for as little as 10 pesos ($0.54) a unit, and where you can pay with Bitcoin. The president of the Metropolitan Council of Tourism, Sergio Lois Heredia, says that most people paying with Bitcoin are foreigners, but some locals use it too.
On the opposite coast, the pacific town of Puerto Escondido is an increasingly popular destination for foreigners. Known for its surf waves and preservation of authentic culture compared to Cancun or Vallarta, paying for your stay in this beautiful town with Bitcoin at the Tabichín Hotel is now possible. This establishment is the first hotel in the country to implement peer-to-peer digital payments, evidently targeting foreigners.
If you want to turn your short stay into a longer one by buying real estate, as many as 3000 properties can now be purchased in Mexico with Bitcoin. The country has two registered real estate transactions: 4.2 million pesos in Ajijic (Jalisco) on July 2021 and the second one for 5.7 Bitcoin (or $248,000) in Tulum on January 2022. Both were purchased by foreigners, proving once again the beginning of a potential product-market fit.
The Tulum transaction was done through the international real estate broker LaHaus, allowing you to choose from thousands of properties nationwide to buy with Bitcoin. You can find more details about their service here. On another note, a fellow French Canadian expat living in Puerto Escondido has recently launched Jellyfish Management: a local real estate agency that can help you acquire land, build a tiny home or a villa on it, and earn passive income by renting it, all paid with Bitcoin.
I’ll take a look at these services during the next bull market.
Narcotrafficking Cartels use Bitcoin for its Censorship Resistance
Even though many politicians and establishment influencers say that Bitcoin is dominated by illegal usage, this has been proven false. However small it is, Narcotrafficking Cartels in Mexico know Bitcoin’s top feature: censorship resistance. Whether you like it or not, this is an element of Bitcoin payments adoption in Mexico.
On August 2021, Carlos Fong Echavarria was arrested in Mexico on narcotrafficking and money laundering charges. Forbes made public a DEA investigation detailing his money laundering operations using Bitcoin a year later.
On Binance and LocalBitcoins, Echavarria and his collaborators would trade Bitcoin and USDC with cash to launder money. DEA informants made 75 transactions totaling $4.7 million, and the agency traced the funds back to drug revenues. His operation is estimated to range from $15-40 million.
This unnamed group is suspected to be either the Sinaloa Cartel or the Jalisco New Generation Cartel, known to use Bitcoin to launder money for years, as announced by the United Nations Office on Drugs and Crime. This DEA investigation proves, on one end, Bitcoin’s censorship resistance and, on the other, how Bitcoin isn't anonymous by default, mainly if traded on centralized platforms like Binance.
Understanding the present situation in the country for Bitcoin payments adoption is possible by looking at its drivers. If we assume that the country's financial situation doesn’t change and push Mexicans to use Bitcoin, foreigners will keep leading the demand for uncensorable digital payments.
The Challenge of Mining Bitcoin in Mexico
Another challenged area of Bitcoin adoption in the USA’s southern neighbor is mining. High electricity costs and government domination of the electrical distribution through the state-owned company CFE are the leading causes. Electrical bills are always confusing, but we estimate that consumers and businesses pay at least $0.1 per kWh, making it too expensive to mine bitcoin at its current difficulty and exchange rate.
Even billionaire businessman Ricardo Salinas has looked into mining Bitcoin through his energy companies but has shared that he won’t do so because he can sell his electricity to the market at a rate of $0.14 kWh. He will focus on purchasing Bitcoin instead.
Two weeks ago, on the 16th of February, I had the chance to co-host the third Meetup of Bitcoin Queretaro, at which Ricardo Carmona, co-founder of Biomining, presented in Spanish How Mexico will mine Bitcoin.
You can listen to his talk here, in which he tries and succeeds in provoking curiosity toward this energy consumption use case.
He predicts that Mexico will mine Bitcoin through presently wasted flare natural gas totaling 770 MhW, underused electrical generators, excess purchased gas, retired power plants that could be relaunched, and biogas. Biomining runs a proof-of-concept operation that turns pig manure into electricity to mine Bitcoin.
I was pessimistic on this topic until Ricardo demonstrated how energy is wasted across the country in astronomical quantities and how Bitcoin mining could solve this over time. I’ll now cover all Bitcoin local communities I’ve found nationwide that you can join to push the adoption mission further.
The Bitcoin Communities Across the Country
Throughout the years, many people have tried to create Bitcoin communities across the country but have not been consistent, probably because of a lack of traction, and most of these projects have been abandoned. Even in my home city of Queretaro, someone created a Bitcoin group in 2018 that was quickly discontinued.
In December 2022, I launched Bitcoin Queretaro (you can read my announcement article here) to educate Mexican nationals and expats for many years.
Here are a few other active groups you can find in the country :
Bitcoin Guadalajara (Ask me about the private Telegram group)
Cincel’s Blockchain Meetup in CDMX (about Bitcoin) (Ask me about the private Telegram group)
I’m sure many others are only managed in private (Telegram groups), but these are indeed the main ones in the country. There’s a lot of work to be done, and I’m doing my part. I dream that in a few short years; I’ll be able to participate in (or even lead) a national education project. We’ll see what happens.
The educational organization Mi Primer Bitcoin based in El Salvador, announced in January 2023 their international expansion plan to Honduras, the United States, and Mexico. Based on a non-profit model, they’ve given Bitcoin Diplomas to 7,700 Salvadorians that have followed their course in person for free. This project is making real progress on Bitcoin education in Latin America, and I’m excited about their Mexican expansion project. Here’s their free PDF manual to learn about Bitcoin in Spanish.
Conclusion
It’s evident that the situation isn’t as far as I and many others wish, but there are certain areas, particularly the remittances market, where serious traction occurs. This article completes a series of three that I started to answer this question; you can read my first two articles to understand this country’s reality better.
A Few Personal Stories About Mexico's Social Class System
The Origins of Mexico's Financial Reality
I’m excited about the work I’ve been doing at Bitcoin Queretaro because interest is growing, and I believe that over a few years, I’ll be able to make a difference in this country. Don’t forget to like, leave comments and share my article. Thank you for reading and subscribing.