Although bitcoin is often touted as a global currency, the reality is that some countries may find it more useful than others. While moving toward more generalized blockchain technology is the trend in the developed world, there are still plenty of people in certain parts of the world who don’t have much interest in permissioned ledgers.
Bitso CEO Pablo Gonzalez was recently interviewed on Trace Mayer’s Bitcoin Knowledge Podcast, and one of the main topics of conversation was why Gonzalez decided to build a Bitcoin exchange in Mexico. Mayer clearly understands Bitcoin’s potential in Latin America, as he noted the following near the beginning of the interview:
“BitPay’s transaction volumes are growing everywhere. They’re growing in North America; they’re growing in Europe; they’re growing in Asia; but far and away, Latin America is where the big growth is coming with BitPay.”
During their conversation, Gonzalez was able to explain why this phenomenon exists, at least from a Mexican perspective.
Latin America Is Waking Up to Bitcoin
Before getting into the specifics of why Bitcoin makes sense for Mexico, Gonzalez briefly touched on Latin America as a whole. At first, he talked about the general lack of Bitcoin adoption in the region, with the notable exception of Argentina:
“Other than Argentina, where there’s a vibrant community and there’s been a vibrant community for a few years, in Latin America the community was very small. At the beginning, the volumes were small and the growth was slow. For the past year, Latin America has been waking up to this technology.”
Although the developed world is used to having relatively stable currencies and mature financial systems, that is not the case in much of Latin America.
“There are so many holes to fix with this technology, and that’s driving a lot of the growth,” Gonzalez noted.
Mexico’s Demographic Is Perfect for Bitcoin
Moving on to why Bitcoin makes sense for Mexico, Gonzalez first focused on the demographics of the country. He explained that Mexicans do not use bank accounts or credit cards anywhere near as frequently as their American counterparts across the border:
“In a place like Mexico you have a very low population that’s banked – seven out of ten Mexicans do not have a bank account and only twelve percent of the population has credit cards. So most of the economy is a cash economy.”
Although banking and credit cards are not prevalent in Mexico, cell phones are everywhere.
“In Mexico, you have extremely high cell phone adoption. Almost every Mexican now has a cell phone,” Gonzalez noted. “Smartphones are growing even faster than in the U.S.”
Xapo CEO Wences Casares has discussed the issues with cash-based economies in the past, and the fact that Mexico has such massive adoption of mobile phones and smartphones means the infrastructure is there for Bitcoin to succeed.
Mexicans Don’t Trust Banks or the Government
The factors behind Mexico’s low adoption of bank accounts do not necessarily include a lack of access to traditional financial systems. Gonzalez noted that there are trust issues in the region when it comes to banks and the government.
“The thing is that people do not trust these institutions – to put their money in these institutions,” he said. “And they feel like they’re being watched. There’s a cultural issue.”
Although Gonzalez noted that the Mexican peso has been one of the most stable currencies in the region in recent history, he did point out that the country has had issues with devaluations in the past. The Bitso CEO pointed out one specific case during the interview:
“We’ve had a couple of times where the Mexican peso, in 1994 for example, went from three pesos per dollar to eleven. So we’ve had a couple times where it’s been really bad.”
Although some Mexicans are unbanked by choice, it is true that gaining access to a bank account or the global financial system can be difficult for many citizens. Gonzalez noted the issues for those Mexicans who do want to be banked:
“There’s also a location issue. If you look at all of the municipalities in Mexico, only half of them have a financial institution in them. Whether it’s a bank or even a Western Union. Even if people want to be banked, they have to travel to these physical locations and get a bank account.”
The popularity of Bitcoin in certain Latin American countries may have been overblown in the past, but it’s clear that both Mayer and Gonzalez are still bullish on the peer-to-peer digital cash system’s chances of widespread adoption in the region. Bitcoin has long been touted as a solution for the unbanked population around the world, but this promise of bringing large numbers of new users from developing countries to the blockchain has not yet come to fruition.