Remittances

Solomon Islands, Soramitsu team up for Bokolo Cash CBDC proof-of-concept

The Solomons join tiny island nations worldwide at the forefront of CBDC development.

The Central Bank of Solomon Islands has launched a proof-of-concept for a central bank digital currency (CBDC) called Bokolo Cash, with Japanese blockchain companySoramitsu providing support.

Bokolo Cash will be worth one Solomon Islands dollar.

Wholesale transfers between commercial banks and simulated cross-border payments and remittances will also be tested. Users will undergo “two-tier” Know Your Customer verification, according to Soramitsu.

Related: Small Islands, big problems: Can Bitcoin fix this? Cointelegraph Cape Verde video

Bokolo Cash will operate locally on a tailor-made blockchain based on Hyperledger’s Iroha.

The project was initiated on Nov. Solomon Islands Prime Minister Manasseh Sogavare said:

Read more

Crypto could eliminate 97% of traditional remittance fees: Coinbase

United States consumers sending international bank transfers pay more than $12 billion annually in remittance fees alone.

A recent blog post from cryptocurrency exchange Coinbase indicates the vast majority of United States remittance fees for international transfers wouldn’t apply to similar transactions conducted using cryptocurrency. 

According to the exchange’s research, “The US average fee rate of 6.18%, means Americans’ average yearly spend is likely close to $12 billion on remittance fees.” The post goes on to state that the average transaction time for such remittances ranges from one to 10 days, while similar cryptocurrency transactions usually take around 10 minutes.

Remittance payments represent a sort of “double whammy” for international transactions as, typically, they require both a sending fee and a conversion fee to exchange between currencies.

Cryptocurrency transactions, however, tend to cost significantly less. According to Coinbase, Bitcoin (BTC) transaction fees average approximately $1.50 and Ether (ETH) averages $0.75. Such fees are potentially much lower than traditional remittance fees, which, according to 6he World Bank, average 6.3%. By Coinbase’s estimates, sending money via BTC and ETH is 96.7% cheaper than traditional remittance methods. 

While the report doesn’t appear to have the rigor of a scientific study, it does illuminate some of the difficulties faced by the more than 1 billion people who rely on remittances and how global cryptocurrency adoption could change the financial landscape. U.S. senders, for example, were responsible for 94.9% of all remittances sent to Mexico in 2022, according to Wilson Center, a D.C.-based research institute.

Related: 9 years after the first Bitcoin ATM, there are now 38,804 globally

It’s estimated that approximately 6% of U.S. adults currently hold some form of cryptocurrency with adoption rates continuing to rise since at least 2019 — with the exception of two quarters’ worth of downturn at the end of 2022. If these rates can increase or maintain the status quo, a trickling exodus from traditional remittances to cryptocurrency-based international transactions could eventually disrupt how the global financial industry handles associated fees.

Central African Republic eyes legal framework for crypto adoption

A 15-member committee is tasked with working on a legal framework that will allow cryptocurrencies to operate in Central African Republic and expedite the development of the national economy.

Central African Republic (CAR), a developing country in Central Africa, set up a 15-member committee responsible for drafting a bill on the use of cryptocurrencies and tokenization in the region.

According to Faustin-Archange Touadéra, the president of CAR, cryptocurrencies can potentially help eradicate the country’s financial barriers. He believed in creating a business-friendly environment supported by a legal framework for cryptocurrency usage. A rough translation of the official press release reads:

“With access to cryptocurrencies, the monetary barriers existing until now will disappear, the main objective of the measures adopted by the government being the development of the national economy.”

The committee responsible for drafting the crypto bill comprises 15 experts from five ministries of CAR — Ministry of Mines and Geology, Ministry of Waters, Forest, Hunting and Fishing, Ministry of Agriculture ad Rural Development, Ministry of Town Planning, Land Reform, Towns and Housing and Ministry of Justice, Promotion of Human Rights and Good Governance.

Through collaboration, the members are tasked with working on a legal framework that will allow cryptocurrencies to operate in Central African Republic and expedite the development of the national economy.

Related: Bitcoin, Sango Coin and the Central African Republic

Crypto initiatives from the African continent marked another milestone as Nigerian crypto exchange Roqqu bagged a virtual currency license for the European Economic Area after two years of waiting for permission from regulatory authorities.

Roqqu CEO Benjamin Onomor told Cointelegraph that off-shore Africans send back over $5 billion to their relatives, and the current remittance system slows the process.

“It makes a lot of sense to solve this problem by using crypto as the vehicle. Crypto is a faster and cheaper route that can bridge the gap and help reduce fees in moving money globally. This is the core of the problem we want to solve,” he added.

Aussie ‘Big 4’ bank mints stablecoin for carbon trading and remittances

This marks the second “Big Four” bank in Australia to launch an Australian-dollar pegged stablecoin in a bid to boost the digital economy.

National Australia Bank (NAB) is set to become the second “Big 4” Australian bank to launch an Australian dollar-pegged stablecoin on the Ethereum network.

Set to launch sometime in mid-2023, the AUDN stablecoin is aimed at streamlining cross-border remittances and carbon credit trading, according to a Jan. 18 report from the Australian Financial Review (AFR).

NAB chief innovation officer Howard Silby said the decision to mint the AUDN stablecoin — which is backed 1:1 by the Australian dollar (AUD) — was based on the bank’s belief that blockchain infrastructure will play a key role in the next evolution of finance:

“We certainly believe there are elements of blockchain technology that will form part of the future of finance […] From our point of view, we see [blockchain] has the potential to deliver instantaneous, transparent, inclusive, financial outcomes.”

The implementation of AUDN for real-time, cross-border remittances could become a way for customers to sidestep the slower and more costly SWIFT payment network.

Carbon credit trading and other forms of tokenzied real-world assets will also be a major use case for the AUDN, Silby said. He also added that they’re planning to offer stablecoins in “multiple currencies” where the bank has licenses.

NAB’s announcement of the AUDN comes nine months after rival Australia and New Zealand Banking Group (ANZ) launched 30 million tokens of its own stablecoin tickered A$DC in March, which is also used for international remittances and carbon trading.

Prior to ANZ and NAB’s stablecoin projects, the two banks planned on teaming up with the other two “Big Four” Australian banks — Commonwealth Bank of Australia and Westpac — to co-launch a nationwide stablecoin backed by the AUD.

However, it failed due to competition concerns and the banks being at different stages in their adoption and strategy, the AFR explained.

NAB, one of the “Big Four” banks in Australia, is set to roll out its own stablecoin in mid-2023. Source: PYMNTS

Jonathon Miller, managing director of crypto exchange Kraken Australia, told Cointelegraph that banks are beginning to acknowledge the technical advantages that blockchain infrastructure offers over traditional legacy systems:

“The persistent adoption of crypto technology by financial institutions like ANZ and now NAB for its potential to create significant efficiencies in the financial system […] is an explicit recognition of the competitive advantage over traditional payment systems.”

“We expect this trend to continue, inevitably evolving to include the adoption of various other cryptocurrencies and tokens for increasing use cases in the Australian economy,” he added.

Related: Stablecoin framework is a near-term priority for Aussie regulators

It also remains to be seen how these private bank-issued stablecoins would work in tandem with the Reserve Bank of Australia’s eAUD — a central bank digital currency (CBDC) that is currently in its pilot phase.

However, NAB is confident the two will be able to operate simultaneously and have their own set of unique use cases.

The driving forces behind crypto adoption in Latin America in 2022

Inflation has fueled crypto growth in the region, stimulating asset tokenization and remittance infrastructure development.

Inflation, cross-border payments, assets tokenization and nonfungible tokens (NFTs) were among the major drivers for crypto adoption across Latin America in 2022, sources in the region told Cointelegraph, with exciting examples of progress across many countries. 

Latin America made up 9.1% of the global crypto value received in 2022, reaching $562 billion between July 2021 and June 2022 — representing a growth of 40% in the period. Four Latin American countries ranked among the top crypto adopters in the latest Chainalysis Global Adoption Index.

Major developments have contributed to these results over the past 12 months. Authorities have been working on central bank digital currencies (CBDCs), implementing standards for business operations and clarifying regulations. Meanwhile, many companies in Latin America have been exploring ways to utilize blockchain technology and digital assets to solve the various challenges that countries in the region face.

“The region is ripe with opportunities for cryptocurrency adoption,” noted a spokesperson for cryptocurrency exchange Bitso, which operates in Brazil and Argentina, among other countries in Central America, adding that:

“For both Argentina and Colombia, the impacts of inflation have driven many to use cryptocurrency. […] For Colombia, remittances are another significant driver of adoption, even surpassing coal as a driver of dollar revenue in 2022 according to a Banco de Bogotá report.”

Crypto Latam

Institutional adoption and regulatory developments have paved the way for Mercado Bitcoin to issue Brazil’s first stablecoin, the MBRL, which is backed one-to-one by the Brazilian fiat currency through a partnership with Stellar. The country’s central bank is scheduling for 2023 the test of its digital currency, and for 2024, its full release to over 200 million people. Also, a recently approved bill will regulate virtual assets providers after years of discussions in Congress.

“Brazil has been a major player in the crypto economy story in Latin America for several reasons: institutional adoption, regulatory advances, and general public buy-in. In that sense, public sector involvement is inevitable — this represents an extremely positive move, which enhances the crypto-active industry while providing greater security for investors,” noted Fabrício Tota, director at Mercado Bitcoin.

Colombia also plans to introduce its digital currency, aiming to increase transparency and prevent tax evasion, which is estimated to account for nearly 8% of the country’s gross domestic product. In Chile, the central bank has delayed plans for the issuance of the digital Chilean peso for a deeper analysis of benefits and risks.

To fight inflation in Argentina, cities such as Buenos Aires and Mendoza started accepting cryptocurrencies for tax payments. At the same time, Santa Fe Province plans to implement crypto-mining activities to raise funds for rail infrastructure upgrades. These may be timely initiatives given that Argentina’s inflation rate is forecast to be 73.5% at the end of 2022, according to FocusEconomics panelists. 

“Argentina is becoming a hub for bringing tech development and resources to Latin America from the rest of the world,” said Ryan Dennis, senior manager at Stellar Development Foundation. “This naturally flows into blockchain development with a large number of startups in the country and thus a growing number of developers and founders working together in blockchain and crypto.”

Tokenization

Latam’s crypto space has also benefited from the tokenization of investment products, allowing many to access products that were previously only available to large investors. “Tokenization of digital assets has been growing over the past years,” including assets such as corporate bonds and real estate debts, noted Dennis. 

Another reason contributing to the rise of tokenization of financial assets is the high-interest rates in the region. Most Latin American countries have double-digit interest rates, which prompts investors to seek assets with predictable returns and less volatility. This is an ideal scenario for financial companies working on tokenization and decentralized finance (DeFi) solutions.

Music and art tokenization are also trending in Latin America. “One revolution that has happened in LatAm is giving artists a window into the world of Web3,” Dennis explained. “There are a lot of artists that have been able to get out of their local communities and country to become internationally renowned. That’s huge.”

Crypto industry challenges in the region are similar to those seen worldwide: A lack of education about blockchain technology, insufficient regulation, and a deficit of trust. “The firms and projects that will lead the crypto in Latin America next year will be the companies thoughtfully addressing the need for increased transparency and trust,” noted Bitso’s spokesperson.

Why the battle for low or no transaction fees really matters

High transaction fees stand in the way of crypto achieving its full potential and being embraced by the masses — but it is possible to make transfers for free.

HitBTC

During the frenzied bull run, transaction fees were running rampant. Over on the Ethereum blockchain, they hit eye-watering highs of $196.638 back in May — rendering the network unusable for most everyday consumers.

The Bitcoin blockchain suffered from a similar issue the year before, accelerating to a record-breaking $300.331. When demand is high, it’s easy for Proof-of-Work networks to get congested — prompting miners to prioritize the transactions with the highest fees.

Here’s the problem: high fees undercut one of crypto’s most potent use cases — a decentralized way of offering peer-to-peer transfers. If sending funds from A to B is impractically expensive, millions of would-be users aren’t going to leverage this technology.

Heavyweights in the crypto sector know this. Over the summer, Ethereum co-founder Vitalik Buterin warned that the cost of single transactions “potentially takes up people’s entire daily income” — especially in developing economies.

Prior to The Merge, Ethereum transactions typically cost between $1 and $20 — and he argued that this simply isn’t good enough for billions of people around the world. Typical daily take home pay stands at $16 in Mongolia, and $4 in Zambia.

Bear markets switch focus from growth to operational improvements — and now, blockchain developers are making a concerted effort to bring costs down. This can help crypto achieve its full potential — especially in vital use cases such as remittances.

Some of the solutions that have been put forward recently include rollups, which bundle transactions together and settle them outside of a Layer 1 network. Not only is this less expensive, but it can also be faster — with data sent back to the mainnet later on.

And just like trying to shove even more clothes into a suitcase, much more emphasis is now being placed on data compression too — ensuring that each transaction takes up a lot less space. This, when coupled with concepts such as sharding, are incredibly encouraging.

But trading platforms — which play a crucial role in interacting with crypto enthusiasts directly — also have a role to play here. Facilitating zero-fee transfers can help deliver an experience all consumers deserve, one where they can move their digital assets without giving a single thought as to how much it will cost.

Making things intuitive

HitBTC is one of the exchanges that is driving forward transactions that incur zero fees. The trading platform offers an intuitive, user-friendly wallet that’s available for Android and iOS devices — providing a simple and powerful on-ramp for those making the switch from fiat.

A particularly new development allows HitBTC users to send crypto to their friends, family and business associates for free — provided they also have an account on this platform. 

This could be a game changer. Data from the World Bank shows that the average cost of sending $200 across borders stood at 6% in the fourth quarter of 2021. And in countries that really rely on foreign workers sending money home to their loved ones, $12 is a lot to lose.

Zero-fee transfers really have the potential to change the game — opening up financial services to all while saving consumers billions of dollars in the process. Plus, when crypto is being bought or sold, HitBTC claims to offer some of the lowest fees in the market today.

But this is just one piece of the puzzle, and this exchange says even more needs to be done. 

Demystifying crypto

Many crypto enthusiasts remember the first time they tried to send Bitcoin from one address to another. Confronted with a wallet represented by a long string of letters and numbers, there’s so much pressure to avoid typos — amid fears the crypto could be lost forever.

But it doesn’t have to be this way. With Web3, we’re already seeing human-readable addresses gain popularity, with snappy domains such as .eth and .crypto. And while this is an encouraging development, HitBTC believes there should be other options too. 

To help reduce the inconvenience associated with sending funds, HitBTC offers its customers an opportunity to transfer digital assets to each other by email, a user ID, or using anonymous links. Irrespective of whether someone prioritizes privacy or simplicity, there’s an option to suit everybody.

HitBTC’s straightforward approach has also been reinforced by an elegant interface for send and receive screens that enables the process to be completed in a couple of taps.

Crypto can often be incredibly daunting for people who aren’t technically savvy, but HitBTC proves that it doesn’t have to be like this. And when coupled with the advent of zero-fee transfers, it’s tackling the pain points that stand in the way of mass adoption.

Overall, HitBTC’s crypto wallet aims to be a one-stop shop for beginners and experts alike. Assets can be secured with two-factor authentication, biometrics or Face ID, and managed across more than one device. Innovative measures are also used to shield funds from fraudsters, and a dedicated customer support team is always on hand to offer help if access to an account is lost in an emergency.

Even more useful features are on the horizon, and it’s all part of an ambitious quest to make crypto far less scary for newcomers… and much more practical for the veterans.

Material is provided in partnership with HitBTC

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.

Western Union may be planning to expand its digital offerings far beyond remittances

Trademark applications seem to hint at an asset and commodities exchange, insurance, and Western Union’s own token as it faces increasingly diverse competition in the remittances market.

Western Union may be preparing to offer crypto-related services, judging from trademark applications filed by the company last week. This is the latest of several attempts the company has made to enter the cryptoverse. So far, it has had limited success.

Western Union filed for three trademarks on Oct. 18. According to trademark attorney Mike Kondoudis, activities covered by the applications include managing wallets, exchanging digital assets and commodities derivatives, issuing tokens of value, and brokerage and insurance services.

Western Union is a major provider of cross-border remittance services, and it showed its interest and uncertainty in cryptocurrency early. It partnered with Ripple to settle payments of remittances in 2015, but that partnership remained in the test phase three years later, and Western Union announced that it was not adding crypto transfers to its services in the foreseeable future.

Western Union did, however, continue to investigate and engage with electronic wallets. It partnered with blockchain platform Coins.ph to enhance its services in the Philippines with technical support from Thunes.

The remittance market is becoming more competitive. In February, Coinbase targeted Mexico, the world’s second-largest remittance market, with a service that allowed users to send U.S. dollars and withdraw Mexican pesos. Several other companies have entered the Mexican market this year as well, and a number of financial inclusion solutions are also offering alternatives to traditional remittance providers.

Related: Crypto.com to roll out Google Pay integration as Big Tech continues to embrace crypto

Now, Western Union seems to be positioning itself to offer remittance services and more on the crypto market, such as a digital assets exchange and insurance, and it might issue its own token. Western Union is still entering a crowded and competitive field, where companies such as PayPal and Mastercard have also recently opened up shop.

Remittances drive ‘uneven, but swift’ crypto adoption in Latin America

The Latin American region now makes up for a 9.1% share of the global crypto value received in 2022 with remittances and high inflation the highest drivers of adoption.

Remittance payments, fiat fears and profit-chasing have been the three most significant drivers of crypto adoption in Latin America, according to a new report.

The seventh-largest crypto market in the world saw the value of cryptocurrencies received by individuals rocket 40% between July 2021 to June 2022, reaching $562 billion, according to an Oct. 20 report from Chainalysis. 

Part of the surge was attributed to remittances, with the region’s overall remittance market estimated to have reached $150 billion in 2022. Chainalysis noted that crypto-based service adoption was “uneven, but swift.”

The firm pointed to one Mexican exchange operating in the “world’s largest crypto remittance corridor,” which processed over $1 billion in remittances between Mexico and the United States in the year to June 2022 alone.

It marked an increase of 400% year-on-year and accounted for 4% of the country’s remittance market.

However, the region’s soaring inflation rates have also played a huge part in crypto adoption, according to the analytics firm, particularly in the adoption of the United States dollar-pegged stablecoins.

“Stablecoins – cryptocurrencies that are designed to stay pegged to the price of fiat currencies like USD – are a favorite in the most inflation-ravaged countries in the region,” explained the firm.

The region has been battling with staggeringly high inflation rates, with an estimate from the International Monetary Fund revealing that inflation across the largest five Latin American countries reached a 25-year high in August to 12.1%.

This has led regular consumers, attempting to protect themselves from their plummeting national currencies, to take and hold stablecoins in order to make their everyday purchases.

The report cited a June Mastercard survey that found over a third of consumers already use stablecoins to make everyday purchases. Meanwhile, Chainalysis noted that citizens from Venezuela, Argentina and Brazil were most likely to use stablecoins for small retail transactions (under $1,000).

Venezuela in particular has seen its national fiat currency the bolívar depreciate by over 100,000% since December 2014, the firm added. 

Argentina and Brazil also saw significant shares of stablecoins used for sub $1,000 transactions. Source: Chainalysis

Interestingly, the report found that citizens in the larger and more developed Latin American economies were also likely to adopt cryptocurrencies as a means of profit.

Related: Latin America is ready for crypto — Just integrate it with their payment systems

Chileans were the most involved in decentralized finance (DeFi), with over 45% of all crypto transaction volume taking place on DeFi platforms, followed by Brazil at just over 30%. Brazil was the number one country in the region for crypto value received, closing in on $150 billion.

“Latin America’s more DeFi-centric crypto markets are not unlike Western Europe’s or North America’s, where market participants are embracing cutting edge, returns-focused crypto platforms moreso than savings-centric centralized services,” Chainalysis explained.

Why crypto remittance companies are flocking to Mexico

Mexico has a burgeoning crypto remittance market that has immense potential.

Mexico is the second-largest recipient of remittances in the world, according to 2021 World Bank statistics. Remittances to the nation jumped to a record $5.3 billion in July, which is a 16.5% increase year-over-year compared to the same period last year. The steady growth presents myriad opportunities for fintech companies.

Not surprisingly, droves of crypto companies are setting up shop in Mexico to claim a share of the burgeoning remittance market.

Over the past year alone, about half a dozen crypto giants, including Coinbase, have set up operations in the country.

In February, Coinbase unveiled a crypto transfer service tailored to United States-based clients looking to send crypto remittances to Mexico. The product enabled recipients in Mexico to withdraw their money in pesos.

Other companies have since joined the foray. In August, the Malaysia-based Belfrics digital currency exchange announced plans to open crypto transfer operations in Mexico. According to the published communique, the firm will start by launching blockchain wallet and remittance service solutions.

Another notable company that is jostling for a share of the Mexican crypto remittance market is Tether. In May, the crypto company launched the MXNT stablecoin, which is pegged to the Mexican peso. According to the enterprise, the collateralized digital currency will help customers to navigate volatility and use cryptocurrencies as a store of value.

Besides the new entrants, local Mexican crypto companies such as Bitso, which is one of the largest crypto exchanges in the Latin American nation, are already making moves to enhance their reach in an increasingly competitive market.

In November 2021, the Mexican firm established an alliance with U.S.-based Circle Solutions. The collaboration allowed the agency to use Circle’s payment system to facilitate U.S.-to-Mexico crypto remittances.

Cointelegraph had the opportunity to speak with Eduardo Cruz, head of business operations and enterprise solutions at Bitso, about the factors driving the crypto remittance trend in Mexico. He cited high bank transaction costs, slow settlement times and the lack of access to banking facilities as some of the factors pushing the masses toward crypto remittances.

He also highlighted recent alliances that have helped Mexican crypto companies bring crypto remittance services closer to nationals around the world, thereby boosting their adoption.

“For example, Bitso’s clients such as Africhange, which recently integrated Canada–Mexico crypto-powered remittance services to Bitso, and Everest, which enables remittances from the United States, Europe and Singapore into Mexico, are offering a cheaper and faster way to send money to Mexico,” he said.

Factors driving the Mexican crypto remittance sector

One of the biggest factors driving the Mexican crypto remittance sector today is the huge Mexican population residing in the diaspora. Presently, the U.S. and Canada have the highest number of Mexican immigrants.

According to data released by the U.S. Census Bureau in 2020, there are approximately 62.1 million Hispanic people residing in the U.S. today, with Mexicans comprising 61.6% of this population.

Going by 2021 numbers, money sent to Mexico from the U.S. accounted for about 94.9% of all remittances, while Mexicans residing in Canada sent $231 million in the second quarter of 2022.

In a nutshell, the rising number of Mexicans migrating to the U.S. and Canada is pushing remittances to new levels, and the high demand is spilling over to the crypto payments industry.

The decline of the Mexican peso and the emergence of a strong dollar have also contributed to the spike in remittances over the past couple of years.

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This phenomenon has occurred in previous crises, such as the 2008 financial crisis, which plunged the Mexican economy into turmoil. In times like this, Mexican institutions and investors usually tend to seek refuge in the greenback, which typically has a higher buying power.

In March 2020, when coronavirus lockdowns began, the U.S. dollar’s purchasing power jumped by approximately 30% in Mexico. At the same time, the average remittance transfer to Mexico increased from $315 to $343.

Today, the availability of dollar-pegged cryptocurrencies allows Mexicans living in the diaspora to leverage the heightened buying power of the USD to make investments and purchases in their home country, hence the higher remittance rates.

Greater convenience

Blockchain technology eliminates third-party mediators from transaction processes, which leads to lower transaction costs and less time used when undertaking remittance transactions.

Cointelegraph caught up with Structure.fi president and co-founder Bryan Hernandez to discuss the impact of these factors on the Mexican remittance market. His company operates a mobile trading platform that gives investors exposure to traditional and crypto financial markets:

“Crypto businesses see a huge opportunity here to streamline (conventional money transfer) processes using blockchain technology. Using crypto, cross-border payments can be made directly with little or no fees instantaneously.” 

In Mexico, many financial institutions are also located far away from rural areas, and this makes it hard for the locals to access financial services. Crypto remittance solutions are beginning to close this gap by enabling citizens in such areas to access their money without having to travel long distances.

Moreover, they are able to serve the unbanked. As things stand, over 50% of Mexicans lack a bank account. This makes crypto remittance solutions convenient for citizens in this demographic, as all that’s needed to receive funds is a crypto wallet address.

Another reason why more Mexicans are embracing the crypto remittance fad is their distrust of banks. Mexicans living in the diaspora are sometimes subjected to redlining practices, and this has led to more people using crypto remittance solutions.

Dmitry Ivanov, chief marketing officer at CoinsPaid — a crypto payments firm — told Cointelegraph that the wider use of crypto remittance networks in Mexico was bound to boost adoption overall.

“The clear advantage of digital currencies is what is paving the way for their broad-based adoption in the country and the Latin American world as a whole,” he said, adding:

“The benefits derived from digital currencies have made Mexicans see how exploitative banks have been thus far with their charges, and the general comparative inefficiency has made them distrust traditional financial institutions in general. With a little more regulatory push, the country’s remittance inflow may be dominated by cryptocurrencies.”

A few hurdles

Blockchain remittance solutions provide a raft of important benefits to Mexican users, such as fast transfers and lower transaction fees.

However, they have to overcome some fundamental challenges to dominate the cross-border payments market. The technical nature of crypto platforms, and limited local currency withdrawal options, for example, present some unique challenges that are likely to slow down adoption.

Mexican citizens also still prefer using cash to make payments. According to the 2021 McKinsey Global Payments Report, Mexico was ranked top among countries projected to have high cash usage over the next couple of years.

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The research report forecasts that consumer cash payments will account for about 81.5% of all transactions in Mexico by 2025.

This presents a major hurdle for crypto adoption in the country, despite rising crypto remittance figures.

Going forward, it will be interesting to see how the tech-savvy and crypto evangelists navigate the challenges facing adoption and take advantage of the momentum provided by the growing remittances industry.

Vietnam’s crypto adoption: Factors driving growth in Southeast Asia

Vietnam has the highest crypto adoption rate in the world. There are numerous factors driving the trend.

The Southeast Asian nation of Vietnam now ranks among the top nations adopting cryptocurrencies. Indeed, the country has ranked first on Chainalysis’ Global Crypto Adoption Index for two years in a row.

Chainalysis’ research methodology took into account population-adjusted adoption in crypto platforms ranging from centralized exchanges to peer-to-peer (P2P) payment networks. Web traffic to major crypto networks was analyzed to determine countries with the highest interest and adoption percentages.

That said, Vietnam’s high adoption rate is a puzzling phenomenon, begging the question: Why is crypto adoption so high in the country?

No cryptocurrency taxes

There are numerous reasons why the crypto adoption rate in Vietnam is so high and one of them is that, unlike in the United States and other major jurisdictions where cryptocurrency holdings are taxed, there are no crypto taxes in Vietnam. 

Right now, the Vietnamese government does not even recognize cryptocurrencies as legal tender. While the nation’s tax authorities have shown interest in taxing cryptocurrencies, they lack the mandate to designate them as taxable assets. As such, Vietnamese law is largely silent when it comes to crypto taxation. 

Consequently, financial institutions in the country are barred from handling them. However, Vietnamese citizens are allowed to possess and trade crypto.

The lack of crypto taxes makes digital currencies ideal as investment instruments, hence the rise in adoption. The trade-off is that Vietnamese law doesn’t protect crypto users in the event of scams or losses. As such, cryptocurrencies cannot be used legally in trade relationships.

However, the nation’s financial regulatory agencies are working to come up with elaborate crypto usage guidelines. This is following a July 2021 directive issued by Prime Minister Phạm Minh Chính in which he asked the State Bank of Vietnam to explore the benefits and downsides of digital currencies with a view to draft regulations. The institution is likely to come up with a raft of measures that include tax and user protection guidelines.

Cointelegraph had the chance to speak with Gracy Chen, managing director of the Bitget cryptocurrency exchange, regarding Vietnam’s regulatory landscape and the developing situation.

According to Chen, clear and robust regulations would allow institutional inventors in the country to start dealing in crypto, and this would be a big win for the industry:

“When the regulation actually comes out, it may lead to a short-term impact on local fiat exchange trading, but in the longer term, clear regulation may encourage broader adoption and lay the groundwork for increased retail and institutional engagement since a better-regulated market will provide greater protection and increase trust of investors. So overall, the pros outweigh the cons.” 

Vietnam has a huge unbanked population

Many Vietnamese have limited access to standard financial services. According to a 2021 study carried out by Statista, the country ranks second among the top 10 unbanked nations. The report highlights that about 69% of the citizenry lacks access to typical banking services.

World Bank estimates indicate that just over 61% of the country’s population resides in rural areas, where access to modern banking services is limited. This void is rapidly being filled by cryptocurrency networks. Novel revolutionary blockchain concepts such as decentralized finance (DeFi) are also gaining traction among Vietnamese crypto investors who wish to obtain credit for crypto investment purposes.

DeFi is a hypernym for blockchain-based financial networks that provide services similar to those offered by banks. DeFi platforms allow users to earn interest on their money, lend and borrow funds, as well as trade in crypto derivatives. They also enable investors to safeguard their assets using DeFi insurance and don’t require paperwork. This makes them convenient for unbanked Vietnamese, especially those who wish to scale their crypto investments and earn passive income.

Notably, Vietnam is ranked second among nations with the highest DeFi usage in the world, according to the 2021 Chainalysis Global DeFi Adoption Index report.

Remittances

In 2021, Vietnamese nationals living in the diaspora sent home over $18 billion in remittances, setting a new record, which made the country the eighth biggest remittance beneficiary in the world. This was a 3% increase from the $17.2 billion recorded in 2020.

For Vietnamese who regularly send money to their families in Vietnam, transfer fees are often exorbitant. The surcharges usually include administrative fees and exchange rates. According to World Bank statistics, remittance costs to Vietnam average about 7% as of 2020.

Exorbitant fees, in addition to the unbanked population’s lack of access to money transfer services, have made cryptocurrency transfers an appealing option for Vietnamese living abroad to help support their families back home.

While blockchains do have transactions fees, they often pale in comparison to those of remittance networks, and furthermore are P2P and don’t rely on a middleman to complete the transaction.

The rising popularity of GameFi 

Blockchain games with financial incentives, often referred to as GameFi, use innovative economic models that allow users to earn rewards while playing. The rewards are usually in the form of nonfungible tokens (NFTs) and cryptocurrencies.

As cryptocurrencies are at the heart of GameFi environments, many gamers learn how they work as part of the gameplay, providing another avenue for adoption.

According to Chainplay’s State of GameFi 2022 survey in August, 75% of GameFi crypto investors said that they started investing in digital currencies after joining GameFi platforms.

GameFi, especially play-to-earn (P2E) games, are immensely popular in Vietnam and have contributed greatly to cryptocurrency adoption in the country.

According to a 2021 research report published by data aggregation service Finder, Vietnam ranks sixth on the list of countries with the highest percentage of P2E gamers. According to the survey report, 23% of Vietnamese participants said that they had, at some point, played P2E games.

Today, numerous GameFi startups have set up shop in the country due to the pervading NFT gaming culture, and this is, in turn, driving crypto adoption. The developers include Ancient8, Sipher and Summoners Arena.

Notably, Axie Infinity, one of the most popular play-to-earn games in the world, has its roots in Vietnam.

Chen said that the relationship between GameFi and crypto adoption is part of the reason why both sectors are thriving:

“According to data from Google, Sensor Tower, and Data.ai, Vietnam ranks first in Southeast Asia in producing applications and games in stores like Apple Store and Google Play. Meanwhile, the new huge crypto adoption all over the world last year was in part due to GameFi. These two factors are significantly connected, creating massive crypto adoption in Vietnam.” 

Cryptocurrencies as a hedge against inflation

Vietnamese citizens have, throughout history, preferred using other national currencies such as the United States dollar during times of economic turmoil and hyperinflation. In recent years, Vietnamese people have also been accumulating assets such as gold to hedge against inflation.

At some point in the past decade, the Vietnamese citizens held as much as 400 tons of gold.

Of course, the emergence of cryptocurrencies has also led to more Vietnamese citizens using them to hedge against inflation instead of tangible assets such as gold.

While the Vietnamese central bank has warned individuals and institutions against dealing in virtual currencies due to their mercurial nature, dwindling faith in the Vietnamese dong has led to more Vietnamese investors turning to digital currencies. According to data derived from Statista, Bitcoin (BTC), which is widely used by investors as a hedge against inflation, is currently the most popular cryptocurrency in the country.

The report reveals that search interest in the country for the prime cryptocurrency stands at about 84.5% relative to other cryptocurrencies.

Crypto adoption in Vietnam is set to persist as more Vietnamese discover the convenience and possibilities of digital assets. Extensive regulations, however, appear to be a long way off. The State Bank of Vietnam has until 2023 to study the pros and cons of cryptocurrencies and come up with policy recommendations.