As Cryptocurrencies Take Over, Mexico Struggles to Keep UpBy Emilio Aristegui | Thu, 10/21/2021 - 13:49
The debut of the first Bitcoin exchange-trade fund (ETF) in the New York Stock Exchange (NYSE) represented a major step for the legitimization of cryptocurrencies around the world. However, the Mexican Stock Exchange faces ambivalence from the federal government as it seeks to list cryptocurrencies for trade.
Mexico also received positive news from an International Monetary Fund (IMF) analysis that predicts an important recovery for the economy, estimating a 6.2 percent growth for 2021 and 4.0 percent increase for 2022.
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Five countries have already launched their own digital currencies, as 15 more run pilot programs to develop their own. Former CIA and NSA Whistleblower Edward Snowden called them “the newest danger cresting the public horizon.” Mexico, however, is falling behind in what appears to be a new global transition. But there appears to be some domestic interest on as the Mexican Stock Exchange seeks authorization to list cryptocurrencies for trade, going against the federal government’s ambivalence.
Miguel Díaz Díaz, General Director of Payment Systems and Market Infrastructures at Banxico, delineated the central bank’s vision for financial inclusion. “Every Mexican should be able to send and receive electronic payments or transactions in a seamless, efficient, transparent and safe way.” For Mexico to fully develop a financial inclusion pyramid, the country needs the participation of all the major financial entities, as it is impossible for a single entity to coordinate the project, said Díaz.
Banxico stated that bottlenecks and global inflation rates have affected Mexico over the past six months, increasing the country’s inflation rate. In September, Mexico’s inflation reached 6 percent, leading Banxico’s Board Members to raise the benchmark rate by 25 percentage points to 4.75 percent. Expectations from the Board indicate headline and core inflation will increase again in 2022; Mexico has not seen a peak of this caliber since 2017.
ProShares Bitcoin Strategy ETF (BITO) made its debut on the NYSE as the first exchange-trade fund. This breakthrough granted the cryptocurrency legitimacy after six months of steady growth. The SEC’s decision will most likely increase investment in cryptocurrencies, as the Mexican Stock Exchange is already seeking to list cryptos for trade.
The Securities and Exchange Commission (SEC) published a report highlighting the risks and objectives of BITO, after its unprecedented NYSE entrance. SEC stated that the debut of this fund could bring numerous risks for investors. “Bitcoin and bitcoin futures are relatively new investments. They are subject to unique and substantial risks, and historically have been subject to significant price volatility.” The Commission is making sure that investors fully understand the risks regarding the cryptocurrency and warned that “You should be prepared to lose your entire investment.”
After suffering one of the worst GDP decreases in history (an 8.3 percent contraction after the COVID-19 pandemic), Mexico could see a 6.2 percent recovery according to the International Monetary Fund (IMF). Economists from IMF predict a 4.0 percent growth for the Mexican economy in 2022, indicating an important recovery for the country after a catastrophic 2020. The IMF also reports an average increase of 2.0 percent for Mexico’s GDP until 2026.
Rogelio Ramírez de la O, Mexico’s Minister of Finance, attended the global IMF and World Bank global bilateral meetings in Washington to highlight Mexico’s commitment to dialogue, exchange of ideas and full collaboration with the international community. He also congratulated US Secretary of Treasury Janet Yellen for the global consensus regarding the adoption of a minimum tax for transnational companies. Mexico’s representative stated that the country’s economic plans for 2022 will focus on: strengthening social support, maintaining fiscal discipline and promoting public spending for infrastructure.