If Mexico had always been a huge market for remittances, the coronavirus pandemic has made it even larger.
In 2021, Mexico was the third-largest recipient of remittances worldwide after China and India. According to the Mexican central bank, the amount of money sent to the country from nationals living abroad reached $51.6 billion in 2021, a 27% increase from 2020.
Almost all, 95%, came from the United States. Analysts suggest last year’s increase was mostly due to the additional income Mexican first-line workers in states like California, Texas and New York were getting. Plus, they were also recipients of U.S. government-backed stimulus checks. In early January, Mexican President Andrés Manuel López Obrador said Mexican immigrants’ remittances have been key to the country’s post-pandemic economic recovery.
About 99% of these remittances were sent through electronic wire transfers. Money orders and cash deposits comprised the remaining 1%, although these might begin to be substituted by crypto-based remittance services. Bitso, Mexico’s largest crypto exchange, says it saw a fourfold increase in cross-border remittances between Q1 2021 and Q1 2022.
For a while now, sending remittances through crypto has been mostly done on these types of exchange platforms. Frida Vargas, head of business development at Bitso, told CoinDesk the company processed about $1.2 billion in remittances between the U.S. to Mexico in 2020. “Our main users are remittance companies, who use crypto technology to improve and make the remittance sending and collecting process easier,” she said.
However, according to a researcher from the Universidad Iberoamericana de Puebla, Mexican immigrants in the U.S. are wary of using cryptocurrencies to send money back to their homeland because “they change their worth every day.” That’s where stablecoins become handy because they help recipients hedge against any devaluation of their local currency.
Source: El Financiero