The Rise of Cryptocurrencies in Latin America: Interview

The international blockchain industry size is projected to rise from USD 3.0 billion in 2020 to USD 39.7 billion by 2025, at a remarkable Compound Annual Growth Rate ( CAGR) of 67.3 percent in 2020–2025. The growing need to automate business processes and the need for advanced supply chain management solutions of blockchain technologies are pushing the overall blockchain industry to higher ground.

In Latin America, the enforcement of cryptocurrencies exists across various statutory frameworks. For those countries with stricter regulation — Bolivia, for example — there has been a comprehensive ban on cryptocurrencies and exchanges. In contrast, Ecuador has imposed a ban on the sale of all cryptocurrencies other than the government-approved “SDE” coin. By comparison, in Mexico, Argentina, Brazil, Venezuela, and Chile, cryptocurrencies are widely adopted as payment by traders and traders. Cryptocurrencies are also viewed as securities for tax purposes: they are usually subject to capital gains tax across the country, although trades in Brazil and Argentina are often subject to income tax in some cases.

The digital currency Regulations in Latin America are relatively limited: several countries do not have explicit laws regulating cryptocurrency trading. They thus do not restrict exchanges beyond the limits of existing legislation. Mexico controls exchanges to a certain extent: the Financial Services Firms Act applies the anti-money laundering (AML) regulations to cryptocurrencies by licensing and monitoring provisions.

 I sat down with Adrian Lujan, COO of Mexo Exchange, to discuss the cryptocurrency scene in Latin America and why the customer behavior is increasing.

Ishan Pandey: How is the Bitcoin market in Mexico right now? I have read that Mexico is embracing cryptocurrency at a very rapid pace with 400,000 active trading accounts. Would we love to know about the ground level adoption of bitcoin and cryptocurrencies? 

Adrian Lujan: It is estimated that there are 800,000 users in Mexico use bitcoin and other cryptocurrencies. The reasons for this are several like diminished trust in the government and the economy as a whole. That’s why we are focussed on launching our services in Mexico and Latin America, where the adoption of cryptocurrencies is the highest in the world due to the political and economic situation. We have seen that economies that go through tough times due to mismanagement see a massive surge in cryptocurrency adoption as a hedge and haven for users. Due to gang violence and mismanagement of state institutions in Latin America, the trust in government institutions has diminished, and we forecast that due to the current pandemic situation, this gap is only going to increase.

The masses feel betrayed by their elites. Due to which now they are placing their trust in new-age technologies like Bitcoin because people have seen that they trust a technology that is not governed by anyone but by maths only. People in Latin America have lost trust in centralized systems as they are susceptible to corruption, and that is why Bitcoin and cryptocurrencies are a revolution that is having a profound impact on our society.

Reports indicate that in Mexico, 6 out of 10 people are somewhere related to the cryptocurrency’s ecosystem. So the change is already happening, and that we are expanding as much as we can in Latin America by providing fiat on-ramps in the Mexican peso, Uruguayan peso, Argentinian peso, Chilean peso, Colombian peso, Peruvian sol, and Belize dollar.

Ishan Pandey: Please tell us about the regulations regarding blockchain and cryptocurrencies exchanges in Mexico?

Adrian Lujan: Currently, in Mexico, the agencies are only regulating the institutions that carry out operations with digital assets in strict contact with the country’s financial services, for this it has generated “La Ley para Regular las Instituciones de Tecnología Financiera” (The Law to Regulate Financial Technology Institutions) where the creation of a committee is established. Inter-institutional to address issues related to Financial Technology, including “activos virtuales” (cryptocurrencies) through an artifact called ITF (Financial Technology Institutions)

In other words, crypto platforms that do not integrate with Mexican financial services are not observed or attended to by the country’s regulations, which allows their operation without much interference.

Ishan Pandey: The Coronavirus pandemic has caused a financial crisis worldwide. How is Mexo approaching this problem, and what opportunities do you see ahead?

Adrian Lujan: Businesses and the life of people have been hit severely due to the pandemic, and we are doing our best to help our people. The poor management of the coronavirus pandemic, for example, in Brazil, has enraged people, and more people are shifting towards cryptocurrencies. People these days are not liking a centralized system where a few people are calling the shots and enriching themselves at the behest of others.

One of the points is to explain how to use trading services so that users in Latin America have an additional mechanism of financial inclusion that gives them a chance to obtain profits. In addition to granting support to the participants in understanding these financial products and their impact.

Ishan Pandey: Do you believe that printing of money is causing the recent surge in Bitcoin, Gold, and Silver prices? Prices of all three broke out during the space period. Do you believe that the Bitcoin market is more of a commodity instead of sound money?

Adrian Lujan: It’s a fascinating question. In my personal opinion, I don’t think that it directly affects Bitcoin. The printing of money is a mechanism in the traditional financial scheme that is not always bad, and many times, it is necessary. Bitcoin has remained without direct impact sometimes. On the other hand, the printing of money can sometimes cause secondary effects that consequently have affected the prices in the crypto ecosystem.

Regarding whether Bitcoin is a commodity or a currency, it seems to me that Bitcoin is a digital currency that is in a different scope of business. The life of people have been hit severely due to the pandemic, and we are doing our best to help our people. The poor management of the coronavirus pandemic, for example, in Brazil, has enraged people, and more people are shifting towards cryptocurrencies. People these days are not liking a centralized system where a few people are calling the shots and enriching themselves at the behest of others.

However, the evidence shows it seems to me that it’s closer to commodities in the US and Europe. But in Latin America, I view bitcoin as a currency because people here are using bitcoin to transact and make payments as the value of their fiat currency has diminished over some time. The perfect example of this is Venezuela.

Ishan Pandey: According to you, what is going to be the effect of the coronavirus pandemic on the economy? Can we expect widespread bankruptcies all over the world?

Adrian Lujan: I see it more as an agent of change for current business models: it will be necessary to restructure, re-plan, and adapt to change. Blockchain seems to me to be one of the indispensable participants for this purpose as it removes intermediaries and brings transparency to the process.

Although we must also accept that, unfortunately, bankruptcies are an inevitable effect in some cases, and it’s going to have a profound impact on our society. More people are unemployed than ever and are seeking jobs. We hope that the blockchain scene in Latin America increases so much that the industry can give promising careers and lives to our people – that’s the ultimate goal of any startup. To have a profound social impact that uplifts our people from poverty and suffering. Blockchain is a technology that can fulfill this purpose best as compared to AI or big data, which is either going to remove jobs or monopolize operations.

Ishan Pandey: What trends and challenges do you use for the cryptocurrency and blockchain industry in the year 2020 in the future?

Adrian Lujan: Mexo is always listening to the communities so that the next step will be together with the ideas of the users, bring the most attractive products to the Latin America region. However, DeFi is one of the elements that we will indeed be observing because people here are trusting a decentralized framework more as compared to a centralized structure. The only challenges are the security of funds and that the intended purpose of decentralization is achieved.

If Defi becomes centralized over a while due to greed or any other reason – the purpose of it is lost. We have seen this recently where the ‘D’ in Defi is being questioned as the team’s hoard tokens to influence governance outcomes and yield revenue. This is a problem that the defi ecosystem and startups operating in this area need to address.

It should not be the case that decentralized finance is just a buzzword and a smokescreen, but inside it is only a centralized system. That is problematic, and in some instances, this is also true.

Volume-wise we see a surge worldwide. People are trading and investing more as they find themselves quarantined at home. That is why we are providing the best institutional-grade products to our customers. The instances of hacks are also going to increase as black hat hackers become more active. It is estimated our industry lost $13 billion due to hacks, and this tells us that security is a big challenge for any company operating in this sector.

The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence by asking the right questions and equipping readers with better opinions to make informed decisions. The material does not constitute any investment, financial, or legal advice. Please do your research before investing in any digital assets or tokens, etc. The writer does not have any vested interest in the company. Interviewer - Ishan Pandey