Central bank digital currencies (CBDCs) are still trending as more countries look towards crypto to solve economic challenges.
To close out the year, Mexico's government announced its commitment to currency digitization. Now, CBDC fever is at the United States' front door.
A Tentative Plan for a Launch By 2024
Late last year, an account representing Mexico's presidency confirmed on Twitter that the current administration will look into a CBDC.
The tweet said the government hopes to make Mexico more financially inclusive, seeking "new technologies and next-generation payment infrastructure."
To that end, the government set a target for 2024 to launch their CBDC. They understand the implications and hope to develop a CBDC payment infrastructure capable of genuinely helping every Mexican.
Launching in Murky Regulatory Waters
The push for a CBDC is huge for Mexico. One of Latin America's leading economies, the country is working to increase financial inclusivity. However, it's facing a regulatory debacle as the government doesn't seem convinced with the idea of digital asset legalization.
In June of last year - in the wake of El Salvador's government making Bitcoin legal tender - two Mexican lawmakers made public overtures for the government to take crypto legalization more seriously.
Eduardo Murat Hinojosa, a senator from the country, confirmed he would submit a proposal to fellow lawmakers addressing crypto regulatory adoption.
Indira Kempis Martinez, senator from Nuevo León, changed her Twitter profile to show the iconic "laser eyes" meme, adding that she's committed to leading Mexico's shift to FinTech and crypto.
Private business moguls are also looking to make Mexico a hub for cryptocurrencies. In June, Ricardo Salinas Pliego, one of the country's wealthiest men, said that his bank - Banco Azteca - will consider accepting cryptocurrencies and storing them for customers. Interestingly, Pliego shared a festive video across social media recommending that Mexicans buy Bitcoin.
Despite these calls, Mexico's government isn't wavering. In October, President Andrés Manuel López Obrador said the country wouldn't be following in El Salvador's footsteps and legalizing crypto.
In a press conference, Obrador claimed Mexico must maintain orthodoxy in its financial system. This means sticking to the status quo and pushing back on efforts to legalize crypto.
The National Banking and Securities Commission (Mexico's financial regulator) and the Bank of Mexico also issued a joint statement confirming that banks aren't authorized to operate with digital assets. Banco Azteca's plans to accept crypto aren't sanctioned by any of Mexico's financial watchdogs.
Could Something Change by 2024?
Mexico's government might be taking an all too familiar approach here - using a CBDC while not necessarily adopting crypto. We saw this play out in Nigeria last year when the Central Bank of Nigeria banned commercial banks from making crypto transactions in February - then launched a CBDC (the eNaira) in October.
For now, the Nigerian government takes the position that crypto isn't banned - banks just can't accept it. So far, top exchanges like Quidax and Patricia have had to rely on peer-to-peer transactions to bypass these restrictions. At the same time, people are free to make transactions using the eNaira with their bank accounts.
Mexico's regulatory landscape could change by 2024. If the government does decide to launch a CBDC, it will want to clear regulatory waters first. At the very least, this could encourage more people to embrace the CBDC.
Since Nigeria's eNaira launch, adoption among everyday people has been little to none. Those who don't know much about crypto still point to the Central Bank's ban as evidence they can't trust the CBDC. The country's crypto-savvy population prefers to keep transacting with standard cryptocurrencies like the exchanges mentioned above.
Mexico's government will need to conduct preliminary research into their prospective CBDC and develop potential protocols. Meanwhile, they will have to clear the regulatory murkiness.