In order to understand how cryptocurrency-based solutions help solve problems related to cross-border payments between Latin American countries, the cryptocurrency exchange Bitso conducted a study in Argentina, Brazil, Mexico and Colombia.
According to the results of the report titled “From barriers to bridges”, although the high adoption rates of bitcoin (BTC) and other cryptocurrencies reflect the opening of the Latin American market, companies in the sector face uncertain legal frameworks that can create barriers.
“The demand for technology and stablecoins is growing due to their potential efficiency in cross-border transactions,” the report highlights, adding that this is a reality even amidst the obstacles. But it is becoming more and more necessary that the regulations are clear.
At this point, the case of Brazil is given as an example, where in recent years a clear regulatory framework and a proactive approach to digital assets have been established.
The situation of the South American giant contrasts mainly with Mexico and Colombiawith ambiguous frameworks and restrictive policies, “which makes full blockchain integration difficult.”
On this topic, Bitso, together with the global payments market intelligence firm PCMI, conducted 16 in-depth interviews that included conversations with 10 money transmitting companies.
The research, conducted between August and September 2024, also involved analysis of public data sources.
In this way, the situation of Mexico and Colombia was particularly analyzed, countries that are in the top 5 of those that use cryptocurrencies the most in the region.
A level of adoption that opens the potential for cryptoassets to be incorporated into cross-border paymentsamid the problems faced by this type of payments in the region.
Traditional cross-border payment models face multiple inefficiencies, which increase costs and delays. Commissions for B2B cross-border payments can range between 1.5% and 2.9%, and in the case of remittances the average cost can exceed, in some cases, 6%, currency availability and reach world highlights the main problems of these systems, which are also subject to many delays.
Report Name.
Mexico has its Fintech Law but prohibits the use of bitcoin
«Mexico is the second largest market in Latin America and leads the region in electronic commerce. Its cross-border sales represent 22% of e-commerce and an annual growth rate of 44% is expected by 2026,” notes Bitso. It is also the second largest recipient of remittances globally.
However, cash remains dominantbecause only 58% of adults have bank accounts. And although the country was a pioneer in the regulation of crypto assets, through the enactment of the Fintech Law in 2018, the skepticism of Banxico (the central bank) has generated restrictions.
They refer to the de facto prohibition that prevents financial institutions from offering services with cryptocurrencies.
Mexico shows progress through its Fintech Law and its enormous potential, but still faces cautious regulatory measures. Cross-border payments have seen significant growth with the emergence of new business models. But companies must obtain a license under the Fintech Law and meet strict requirements.
This is how, despite the fact that the Aztec country has established a general regulatory framework for cross-border payments and digital assetss, “caution persists.” Consequently, regulatory uncertainty remains a challenge.
Colombia awaits a regulation that has not yet arrived
The situation in Colombia is similar, to a certain extent, to that of Mexico, although the circumstances are different. Bitso highlights the South American country as one of the five largest economies in Latin America, with a dynamic digital economy and a flourishing fintech sector.
However, cash transactions still represent almost half of all payments in the country. Something that may change soon, following the announcement by the Banco de la República of a new interoperable instant payment system and the implementation of a clearing house for low-amount immediate payments.
In the midst of this panorama, the cryptocurrency sector remains unregulated. This, amid some regulatory advances generated by the regulatory sandbox that was installed in 2021 and which concluded in July of this year.
As NoticiasVE has reported, the Colombian bitcoin ecosystem has been waiting for almost two years for the authorities to present a regulation proposal for cryptocurrency exchanges, which has the sector in a kind of limbo and forces companies to operate according to current regulatory frameworks, not suitable for the sector.
Meanwhile, adoption is growing rapidly, as digital banking “and cross-border payments companies must contend with various legal frameworks.” That is why it is expected that the regulations, both in Colombia and Mexico, will be more transparent so that cryptocurrencies enter cross-border payments with force.