Mexico badly needs innovative solutions to fight the persistent problems of corruption and inefficient governance. At the same time, blockchain, being a decentralized technology, promises to reduce administrative costs and ensure transparency in public services. The article talks about the current state of Blockchain Development in
- The Public Project “Blockchain HACKMX”
In September 2017, the Mexican government has initiated a blockchain project called “Blockchain HACKMX”. The project’s main goal is to “promote government digital innovation” and to address the issue of public contract corruption.
The project initially arose from the recommendations of the World Economic Forum, which suggested that the use of blockchain technology might be beneficial in combating corruption. Blockchain is considered by the Mexican Government as a technical solution to enhance transparency and trust to eventually improve the processes of public procurement. Blockchain HACKMX aims to address the issue of public contract corruption.
It involves five Government institutions and the state government of Jalisco. In collaboration with Campus Talent Mexico, they were creating a Talent Hackathon (i.e. contest) which encourages group of IT specialists to build blockchain solutions for public services such as tender process, identity management, certificates of deposits and public property register. In total, 40 teams participated in the first hackathon whereby the majority of the projects of the ten finalists are in the area of identity management and public registers. The winning team created a blockchain-based solution for public tenders, which will allow for citizen participation.
2. Regulatory Framework
The new regulatory bill “Ley para Regular las Instituciones de Tecnología Financiera” (Mexico Fintech Law) on Fintech companies, including firms operating in the field of cryptocurrency, was approved by the Mexican congress in March 2018.
This bill generally aims at greater regulatory certainty within the fast growing fintech sector in Mexico by providing more guidelines for electronic payments, crowdfunding and digital assets.
It also provides a conceptual legal framework for digital assets and therefore might be particularly valued by firms interacting with cryptocurrencies. One important aspect is that cryptocurrencies are now recognized as digital assets and thus as a legitimate mean of digital payments and transactions. This is crucial for the entire industry, notably, it
With the Fintech Law, Mexico put itself among very few countries, which are proactively establishing laws for the fintech industry. In fact, Mexico became the first country in Latin America to specifically regulate this industry. Since the newly approved law aims to provide regulatory certainty, proponents of the law are confident that it will boost the fintech industry and even create more competition for traditional banks at the same time.
3. Fintech Industry in Mexico
Mexico has a booming fintech industry, which experienced a 40% growth of startups within the last year. The 334 domestic fintech companies make Mexico a main driver to financial innovation in the region, second only to Brazil with 377 firms.
A study from 2017 revealed that new companies could take over 30% of the traditional banking market in Mexico within the next 10 years.
4. Cryptocurrency Market
With the new Fintech Law in force, Bitso strives for a closer collaboration with authorities (i.e. the central bank) and expects higher financial inclusion, reduced costs for remittance transactions and the “digitalization of money”.
Apart from the new law, the Mexican authorities have remained very quiet about their stance on blockchain and cryptocurrencies. Furthermore, there have been no ICOs(Initial Coin Offerings) in Mexico yet. This is most probably due to the existing legal uncertainty, driven by the finance ministry’s warning that ICOs could violate Mexican law.
Since many Mexicans do not use credit cards or bank accounts, digital payments for retailers in e-commerce get processed through convenience stores with systems like OXXO Pay.
Making use of this huge infrastructure, Bitso today offers cash deposits for bitcoin wallets as well as cash withdrawals at over 140’000 conveniences stores throughout the country. This means that 140’000 convenience stores were turned into cryptocurrency ATMs.
The long-term objective of the “Mexican Blockchain Initiative” is not only to develop separate projects such as this smart tender, but also to develop a national Mexican Blockchain for the public sector. This blockchain should be used as a foundation for further developments in the area of public property registers, identity management and certificates of deposits. Notably, the blockchain will not be fully public but rather a hybrid one, i.e. including public as well as private components.
Compared to the United States where the blockchain development is flourishing, Mexico’s blockchain development has started late and now struggles to retain talent since many Mexicans are tempted to work for tech-companies in the United States.
In response to the lack of local
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