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More than $30 billion worth of transactions a year are carried out via the US-Mexico remittance corridor, which is notably one of the world’s largest cross-border payments channels.
The rise in the adoption of Bitcoin (BTC) and other cryptocurrencies has allowed some users to perform international payments at only a fraction of the cost when compared to using traditional systems.
Emilio A. Cazares and Curtis M. Dombek noted in a post published by the National Law Review:
“Faster moving money does not necessarily mean less cost if there are too many competing and costly regulatory regimes. The United-States-Mexico-Canada Agreement (USMCA) seeks to harmonize the treatment of financial service providers across the three member countries.”
Cazares and Dombek confirm that the USMCA is North America’s first multinational Fintech treaty. They explain that before USMCA, there was NAFTA, which allowed non-banking Fintech firms to work with various independent regulatory frameworks, but there was “little codified incentive to embrace the open banking movement.”
They argue that the USMCA has “aligned” its member nations with the distributed ledger technology (DLT) initiatives that aim to enable blockchain interoperability by developing uniform standards for managing customer data, prohibiting government entities from discriminating against multinational Fintech firms, by making it easier for Fintechs to offer services in other USMCA member nations.
According to the Cazares and Dombek, the USMCA agreement “guarantees financial institutions access to the payment and clearing systems of all other member countries.”
They claim that this is a positive development for digital asset exchanges like Bitso which aim to capitalize on the on-demand liquidity market for member country banks and regional remittance payments providers.
They add: “To encourage Fintech companies to innovate in the face of regulation, the US and Mexico have both adjusted their regulatory stances through novel licensures and regulatory sandboxes. By operation of the USMCA, Fintech companies now have greater access to regulatory sandboxes and policies adopted by any of the three participating USMCA countries.”
Cazares and Dombek further noted that Mexico has been leading the way in Latin America when it comes to establishing open banking standards. The country has enabled its regulatory authorities to “defer authorizations” for new financial services or Fintech businesses and has provided specialized or provisional licenses to digital currency trading platforms, and for the time being, some might be able to operate as financial technology institutions.
The development and issuance of central bank digital currencies (CBDCs) could potentially provide more digital liquidity and greater interest in remittance services like Ripple company’s RippleNet and its XRP cryptocurrency. It could also lead to the development of improved Open Banking standards, Cazares and Dombek argue.
They revealed:“Bi-national partnerships between member financial institutions, payment processors, and cryptocurrency exchanges in the US and Mexico have already formed, securing some companies strategic positions within evolving digital remittance corridors.”
They believe that we should keep a close eye on the US remittance market. They suggest that these developments should be a “reminder” to all financial service providers that they should look into digital asset solutions “in light of newfound and regulatory efforts and protections.”
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