A couple of months ago Bitso finished their round C investment raising $250 million. They now have the distinction of being the first crypto unicorn startup in Latin America.
As one of the biggest exchanges in that part of the country with a 95% market share in Mexico and 60% in Argentina, it is not surprising to see the growth of Bitso in the last couple of years. The most interesting part, however, is its partnership with one of the most controversial cryptocurrencies of the decade.
In 2017, Ripple Labs announced the listing of the XRP token on the Bitso exchange. This led to a larger partnership in 2019 where Bitso began using Ripple’s ODL technology. This allowed the company to deliver cross-border payments and U.S. to Mexico remittances. To this day, Bitso has the world’s largest liquidity of Mexican pesos to digital assets, alongside Moneygram, one of the world’s largest remittance providers.
Mexico’s Bigger Picture
Last year there were 40 billion dollars sent to Mexico through remittances, making them the 3rd largest remittance recipient in the world. The problem lies in the disproportionate amount of unbanked Mexicans and the great need for financial inclusion in the country.
According to Daniel Vogel, Bitso’s CEO, Mexico has a population of 127 million people, 100 million people have a cell phone line, and over 80% of those cell phones are smartphones. What they found most interesting is that while so many Mexicans are interconnected through the power of the internet, there are under 40 million bank accounts in the entire country, and 22 million of those are not actively used. This demonstrates the great market share and need for crypto adoption in Mexico and all over Latin America.
Bitso claims they process 2% of the US-Mexico remittances, which is a big deal considering they are in the early stages of the company. The good news is that Blockchain is transforming the way remittances are done. Today if you want to send money from one bank to another, there has to be an agreement between both banks. If there is no commercial agreement, it has to be sent through several allied banks, making the process expensive and long.
In many instances smaller banks have to pay extraneous amounts of money simply because they lack agreements with bigger banks, leaving customers at those banks with higher fees.
Fortunately, ODL technology solves this. XRP is open 24/7, it is borderless, quick, and cheaper than traditional remittances outlets.
How Does ODL Work With Bitso’s Remittances
ODL, also known in the past as Xrapid works in the following way:
1. An individual who has an account with a financial institution in partnership with Bitso, initiates a payment in U.S. dollars via ODL which is instantly converted into XRP.
2. The payment amount in XRP is settled over the XRP Ledger.
3. Bitso – through its Mexican Peso liquidity pool – instantly converts the XRP into fiat, which is then settled into a destination bank account.
4. The receiver can withdraw their money in pesos in a matter of minutes.
What’s cool is that users are often not even aware that they are even participating in crypto transactions
Bitso has developed partnerships with several financial institutions and companies that allow people to make transactions without realizing they are using XRP. Most of the time, they simply believe they are sending money via the bank or Moneygram. What they may not know is that many payment companies are starting partnerships with Ripple and Bitso.
Recently, Bitso set up their business platform to where Latin American businesses can accept crypto payments. So now we are starting to see people pay their rent and everyday services using Bitso. As more and more people see the advantages of crypto payments, more Mexicans will rely on crypto transactions for everyday use.
The Future of XRP
The growth of Ripple has been shaken this year with the current lawsuit, affecting many partnerships such as Moneygram, who earlier this year ended their partnership with Ripple due to legal concerns and the uncertain future of the company. Although Moneygram mentioned that they will revisit the partnership in the near future, it is clear that Ripple is going through a defining moment in history. Nevertheless, it’s exciting to see the future of crypto remittances take shape. Even with the current U.S environment, it is certain that other countries will continue to utilize Ripple’s services now and in the future..