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Mexico on regulating bitcoin and its emerging fintech sector
Mexico, Latin America’s second largest economy, is looking toward adopting regulation that will help the emerging fintech sector flourish.
Mexico’s relationship with Bitcoin is like many, fickle. But as early as 2014, Mexico began looking into its very own cryptocurrency, the Peso Digital. Since then, the idea has fizzled and officials have gone back and forth about the legitimacy of Bitcoin and other cryptocurrencies.
As one of the strongest and fastest growing economies in Latin America, Mexico is also a relatively untapped market for a solution to one of its biggest financial problems. Over half of the country’s 125-million citizens are lacking a bank account – an issue which ambitious and innovative fintech companies are looking to solve.
Fintech is taking off in Mexico at an unprecedented rate, and taking care of the underbanked is the biggest market.
Legacy banking stagnating
In addition to more than half of all Mexicans living without a bank, the system for those with a bank is incredibly inefficient. The World Bank has stated that there are only 14 banks per 100,000 people, compared to 33 per 100,000 in the United States. Because of this, it is estimated that travel times to reach a bank averaged near 42 minutes in rural areas, and 22 minutes in major cities. And then there’s the wait time once at the bank. Ángel Sahagún, co-founder of Albo, noted: “If you have any problem you have to visit a branch and queue for 30 minutes. Young people, in particular, have higher expectations.”
Young people do indeed have higher expectations. Though Mexico’s financial system was not exactly created to support fast-paced innovation, some bright young entrepreneurs are looking to change the country’s financial landscape.
Two notable innovators in Mexico’s banking section are Albo and Bankaool. Angel Sahagun explained that, with all of the opportunities banks have had in Mexico to tap into this market and provide a chance for the underbanked, the country’s banking system has overwhelmingly neglected this underserved market.
The Bank of Mexico has taken a fairly strong stance on Bitcoin, in particular. In denouncing Bitcoin as a currency, Agustín Carstens, the bank’s highest-ranking official said: “there is nothing to ensure its accounting in a financial system,” labeling Bitcoin as a commodity rather than a currency. But this year, Carstens announced that the bank would seek to experiment with cryptocurrencies in order to figure out a plan of addressing potential complications and work towards creating regulation.
Now, after last year’s failed attempt at creating a bill which would regulate the fintech sector, including cryptocurrencies, the government is currently in the process of drafting a bill which hopes to address issues such as funding terrorism, money laundering, and promoting financial stability.
A draft of the bill, seen by Reuters, reads: “This (legislation) recognizes the need that a sector as dynamic as that of technological innovation needs a regulatory framework that allows authorities to mitigate risks and allow for growth in a competitive environment.”
While there is some apprehension regarding how cryptocurrencies will be regulated as the rumor mill turns, there is also a lot of optimism. Luis Ruben Chavez, the founder of Mexican peer2peer lending firm Yotepresto noted “The regulation is good news for all companies in this sector because … growth will be greater with clear rules.”
The full details of this bill are still unknown, but if the Mexican government takes a supportive path rather than a restrictive one, an entirely new market will open up to aspiring businesses. And in one of Latin America’s most tech-forward economies, this would be big news.
By Michael Kern via CryptoInsider.com