The number of cryptocurrency holders in the country has risen to 3.1 million as global crypto adoption rises. According to a report from Brazilian and Latin American PR and digital marketing agency Sherlock Communications, 2.5% of the country’s population now holds or uses cryptocurrencies.
Sherlock Communications offers factors supporting the growth of crypto in Mexico, highlighting remittances as the major driving force. A recent Sherlock Blockchain LATAM Report 2024 also pointed to growing general usage and institutional adoption. For instance, financial services and business company Grupo Salinas announced last year it would begin to accept Bitcoin (BTC) payments via the Lightning Network. The effects of this development stretch across several sectors in which Grupo Salinas is involved, including retail stores, TV channels, soccer clubs, and banks.
As the largest cryptocurrency by market capitalization, Bitcoin adoption is likely to increase faster than other assets as many customers use BTC to transfer funds, shop at retail stores, or wager at online casinos listed on bitcoincasinos.ltd. These casinos allow bettors to deposit cryptocurrencies, place bets, and withdraw winnings using Bitcoin and crypto assets. According to a report from Mexican cryptocurrency exchange Bitso, 40% of Mexican crypto users generally prefer Bitcoin to other options. The company also says that Bitcoin represents 53% of all user holdings despite price instability.
Other major companies in Mexico are also adopting crypto. Telecoms firm Telefónica has partnered with Nova Labs to expand its coverage and increase efficiency by rolling out blockchain-based mobile infrastructure powered by Nova’s Helium Network. Also, blockchain infrastructure solutions platform Etherfuse announced a tokenized bond offering to Mexican retail investors.
US-Mexico Remittances
Sherlock Communications’ report also mentions remittances, highlighting Mexico as the second largest beneficiary worldwide. In 2023 alone, Mexicans received a record $63.31 billion, a 7.6% increase compared to the previous year. Interestingly, outgoing remittances also increased 19.5% to $1.05 billion. Calculated at an average of $393 per transaction, most of the money came from the US. Among Mexico’s 32 federal entities, Guanajuato received the largest at $5.41 billion.
Major crypto stakeholders Ripple and Coinbase are also targeting the Mexican Market, according to Sherlock Communications. For instance, Coinbase launched a remittance pilot program for residents receiving cross-border payments. Recipients can save the funds in their Coinbase accounts or redeem cash at thousands of locations. Also, Banco de México last year announced plans to use Ripple’s xRapid via XRP as an official bridge between the Mexican peso (MXN) and the US dollar (USD). The aim is to completely settle transactions in not more than two minutes and reduce costs by up to 70%.
Bitso also notes that crypto adoption on its platform has climbed 18% year on year. The exchange states that this increase is largely driven by people between 25 and 34 years old (37% of its Mexican user base) who buy and use crypto.
Lack of Regulatory Clarity
Sherlock Communications’ report also touches on crypto regulation. However, the regulatory landscape requires more clarity as authorities have been reluctant to clarify legal requirements regarding taxes. Currently, there are no specific references to tax requirements for cryptocurrencies. However, the report highlights possible interpretations. For instance:
“Certain interpretations apply general tax provisions and make taxation rates applicable on income tax, from 30 to 35%,16% VAT on every transfer within Mexican territory (but 0% if the buyer is outside of Mexico) and 10% capital gains.”
The lack of clarity could negatively affect Mexican users and eventually stifle growth because institutional players may be reluctant to invest in the country if regulations are unclear. Merchants, retailers, and online businesses like crypto gambling platforms will likely enjoy increased patronage when regulations are clear.
Unfortunately, criminal organizations in Mexico are also contributing to crypto adoption in the country. According to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN), criminals use popular digital assets like Bitcoin (BTC), Ether), USDT, and privacy token Monero (XMR) in the drug trade to buy raw materials required for fentanyl production.
