Byline: Hannah Parker
Blockchain fintech firm Paxos and an online marketplace MercadoLibre have collaborated to bring Pax Dollar (USDP) stablecoin to Mexico users. The move allows for seamless transactions facilitated by MercadoPago, the digital wallet application provided by Mercado Libre.
On June 28 2023, in a press release, Paxos announced that USDP would be available to all Mercado Pago customers throughout Mexico. The company is driven by its vision to become a prominent leader in digital assets across the region and views this initiative as a significant move towards its goal. Even though Paxos is based in the United States with offices in New York, Singapore and London, Paxos has cited data that indicates that more than 60% of its wallets currently cater to customers in Latin America, which highlights the demand for digital assets in the region.
Paxos’ Presence in Mexico
The adoption of USDP in Mexico strengthens the existing partnership between Paxos and Mercado Libre. Mexican users will now have access to the regulated stablecoin through Mercado Pago, expanding their opportunities in the digital asset ecosystem. Head of Latin America of Paxos, Arnoldo Reyes, highlighted the increased demand for transformative technologies among digital asset consumers in the region. Reyes said:
“Mexico is one of the most active marketplaces for digital assets with millions of users tapping into the ecosystem to gain access to key financial services… The launch of USDP within Mercado Pago represents another way that Mercado Libre continues to democratise access to commerce and financial services through innovative digital asset solutions throughout Latin America.”
The Pax Dollar, USDP, is a stablecoin issued by Paxos and subject to strict regulatory oversight by the New York State Department of Financial Services. USDP reserves consist of cash and cash equivalents, while WithumSmith+Brown, PC, an independent accounting firm, issues its attestation reports. Furthermore, the company website states that reports adhere to the attestation standards set by the American Institute of Certified Public Accountants (AICPA), ensuring transparency and accountability.
Push for Stablecoin Regulation
Over the past decade, the stablecoin market has witnessed significant growth despite its challenges and concerns. Paxos’ development comes amidst growing calls for stablecoin-related regulations worldwide in light of recent events such as the collapse of TerraUSD (UST) and the subsequent FTX implosion.
Italy’s top banking authority recently released a report calling on regulators to establish financial conduct standards for stablecoin issuers. A Markets, Infrastructures and Payment Systems report stated the importance of regulating stablecoins due to their close association with the decentralised finance (DeFi) market.
The Hong Kong Monetary Authority (HKMA) plans to roll out a regulatory framework for stablecoins. HKMA seeks public views on the ecosystem and aims to introduce this framework by the end of 2024. According to Undersecretary for Financial Services and the Treasury Joseph Chan Ho-Lim, the number of fintech companies has increased dramatically over the past five years. Chan said:
“HKMA is working with the Bank of Thailand to develop the system, and the Hong Kong administration is focusing on developing Web 3.0. This could develop steadily in the SAR while protecting investors and helping counter money laundering.”
Deputy Financial Secretary Michael Wong Wai-lun emphasised that Hong Kong’s green and sustainable finance market was experiencing significant growth.
Mexico in the Crypto Space
According to a report from Statista, Mexico currently boasts a 9.3% adoption rate for cryptocurrency use, with more than 12 million users. Analysts estimate more than 20 million people in Mexico will hold crypto by 2027, bringing the total adoption to 14.6%.
Introducing USDP to the MercadoPago payment ecosystem adds stablecoin access to Mexico’s service options. This feature could provide much-needed relief from extraneous fees related to remittances for many users.
Among Latin American nations, Venezuela takes the lead in cryptocurrency adoption. However, Mexico ranks highest in total number of retail crypto transactions. A Development Representative from the blockchain analytics firm Chainalysis Daniel Cartolin highlighted that remittances and trade are sectors with a significant presence in retail crypto transactions within Latin America, and crypto is often used for remittance throughout Mexico. Carolin noted:
“Remittances in the traditional world are substantial between the United States and Mexico, and we are beginning to see areas where cryptocurrency is beginning to be adopted for remittances because there are fewer fees when it comes to exchanging cryptocurrencies, and it can be done from a phone.”
Paxos Previous Initiatives
Paxos is a well-known blockchain fintech firm with various dealings. On October 21 2020, Paxos collaborated with PayPal to settle payments through fiat currencies, according to experts at Bitcode Method. PayPal covers the conversion while the merchants receive fiat. Paxos obtained BitLicence, a conditional cryptocurrency licence from the New York State Department of Financial Services.
In February 2023, Paxos received a Wells notice indicating that its Binance-based stablecoin, Binance USD, would be labelled a security and, as such, should have been registered. Paxos released a statement vehemently disagreeing with the SEC’s notion that BUSD should be classified as a security.
On June 27 2023, EDX, a cryptocurrency exchange launched with the backing of traditional finance, announced that it would be dropping Paxos Trust in favour of Anchorage Digital. Paxos Spokesperson highlighted that EDX shifted to focus on a non-custodial offering. With what EDX is building, Paxos hopes to support EDX customers with regulated custody when banks and brokers are onboard to the platform.
While Paxos expands its reach in Mexico with the introduction of USDP, the collaboration with Mercado Libre’s MercadoPago demonstrates the growing demand for digital assets and stablecoins in Mexico. With regulatory bodies worldwide exploring stablecoin regulations, the industry is undergoing a transformative phase that aims to establish a secure and transparent environment for users and participants alike.