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G7 Bank Sector Higher Money Laundering Risk than Crypto Industry, Reports Mexico Financial Intelligence

According to an official report released by the Financial Intelligence Unit (FIU) of Mexico, the G7 banking sector comprising of major banks Santander, BBVA, Citibanamex, Banorte, HSBC, Scotiabank, and Inbursa—was the most prone to money laundering operations, despite being the most regulated.

Who is most at risk of money laundering?

Banks connected to exchange activity were also as highly ranked in terms of money laundering schemes. The report, which depicted the results of the second National Risk Assessment (NRA), discussed money laundering and terrorist financing. It detailed that there were four sectors within the financial industry that were most at risk of money laundering illicit activities.

The four categories were G7 banking, brokerage houses, exchange houses, and multiple banking institutions with commercial operations, as shared by El Economista. Among the four sectors outlined, the one with the highest risk of fraudulent activity was the G7 banking sector, which translated to approximately 80% of the banking sector’s assets.

The report by the FIU of Mexico also separated risk levels for money laundering and terrorist funding into four categories, depending on the magnitude of fraud – low, medium, medium-high, and high risk. The most regulated finance sector, the “G7 banking group,” ranked among the highest risk for money laundering.

Crypto scams easier to track than fiat

Though there appears to be increasing skepticism that fintech and crypto industries are always leveraged for money laundering schemes and monetary scams, the two sectors were surpassed by the traditional banking sector in terms of money laundering risk. The 2020 Financial Intelligence Unit of the Ministry of Finance and Public Credit report did not allocate a risk classification for the fintech industry.

During an ongoing panel hosted by the Association of Certified Financial Crime Specialists in August, Paxful Chief Compliance Officer Lana Schwartzmann mentioned that there are advantages to adopting cryptocurrency in a traditional fiat world. She referenced the infamous Twitter Bitcoin hack and stated that due to the digital trail left by crypto, digital assets fraud is easier to track than fiat. Had it been a traditional money heist, the investigation would not have been resolved as quickly.

Twitter Bitcoin heist

The Twitter Bitcoin (BTC) hack, which held the media spotlight in July, revolved around the narrative of three men who overtook Twitter by storm and generated over $100,000 worth of Bitcoin funds by hacking the accounts of world-known figures such as Elon Musk, Bill Gates, Kanye West, Joe Biden and more.

One of the Richest Men in Mexico Invests in Bitcoin, saying “Paper Money is Worth Nothing”

One of the wealthiest men in Mexico, Ricardo Salinas Pliego has just revealed that he had invested 10% of his liquid portfolio in Bitcoin (BTC). The Mexican billionaire believes that cash is “worth nothing,” as he posted a video showing banks throwing out paper money.

He explained in his post that “paper money is worth nothing, and that “it is always good to diversify our investment portfolio.” In the video, Venezuelan bolivars have been thrown out, as the country has been infamous for its escalating inflation crisis.

Pliego also tweeted and recommended the book “The Bitcoin Pattern,” explaining that Bitcoin could project citizens from “government expropriation.” He then revealed that 10 percent of his liquid portfolio is now in Bitcoin (BTC). According to a translated version of the tweet, he said:

“Today I recommend THE BITCOIN PATTERN, this book is the best and most important to understand #Bitcoin. Bitcoin protects the citizen from government expropriation. Many people ask me if I have bitcoins, YES. I have 10% of my liquid portfolio invested.”

According to Bloomberg’s Billionaire Index, Pliego has a net worth of more than $11.8 billion and is currently in the top five of the richest people in Mexico. Pliego ranks 165 on Bloomberg’s Billionaire Index.

Dan Held, the Growth lead at Kraken also commented on the billionaire’s investment in Bitcoin, saying:

“The institutional herd is stampeding. Mexico’s third richest man just disclosed that 10% of his net worth is in Bitcoin.”

Pliego then responded to Held’s tweet, emphasizing the 10 percent invested was of his liquid portfolio, and not his net worth. Pliego added that 90 percent of his liquid portfolio has been invested in precious metal miners. The billionaire responded to Held’s comment about the institutional stampede, saying:

“For me it’s no “stampede”, started with Grayscale at 800 dlls BTC in 2016.”

Not the only billionaire who has invested in Bitcoin recently

Stan Druckenmiller, a billionaire hedge fund investor has recently hopped on the Bitcoin bandwagon. “I’m a bit of a dinosaur, but I have warmed up to the fact that Bitcoin could be an asset class,” said billionaire Stanley Druckenmiller during an interview with CNBC.

Stan Druckenmiller, one of the world’s top money managers, and previous Chief Strategist for George Soros has an estimated net worth of $5.8 billion according to the Bloomberg Billionaires Index. As reported previously by Blockchain.News in May, Druckenmiller expressed doubts about the US equities market logging a V-shaped recovery, with emphasis on that government stimulus programs would not be enough for a post-pandemic economic recovery.

Amazon Aims to Advance Its Digital Currency Project in Mexico

Amazon has been planning on launching a digital currency project in Mexico, and a job posting revealed that it was looking for engineers and developers for the part.

Per the job posting, Amazon is “looking for a leader to help launch a new payment product starting with Mexico as the initial launch country.”

The new digital currency payment will launch in Mexico first, and will enable customers to convert their fiat to digital currencies that they can then use to purchase online goods and services such as Prime Video. The job was listed in October 2020, but it has recently been updated. The new recruits will work for Amazon’s Digital and Emerging Payments (DEP) division.

Amazon has already launched Amazon Coins, which can be used to access items on the Appstore, such as gems, boosters and power-ups. Aside from creating a game token, Amazon’s move to create a digital currency will be significant, with digital payments on the rise due to the COVID-19 pandemic.

Amazon’s DEP project comes at a time when Amazon CEO Jeff Bezos had announced that he will be stepping down by the end of 2021. Instead, Bezos will become the executive chairman and give the reins to Andy Jassy, who is currently the chief executive officer for Amazon’s Web Services. Although Amazon has not yet experimented with cryptocurrency payments or offered that option as did PayPal, a move in that direction may not be far-fetched, as many companies have come to explore cryptocurrencies more.

Previously, PayPal had launched cryptocurrency payments. On its application, Bitcoin, Ethereum, Bitcoin Cash, and Litecoin could be leveraged. PayPal’s CEO Dan Schulman had revealed that the launch of cryptocurrency services on the payments platform is meant to bolster the adoption of digital currencies. It had also been implied that when central bank digital currencies come into play later, PayPal will ensure that its payments network is compatible with CBDCs.

Mexico Turns Bitcoin Development Down after Billionaire’s Crypto Pitch

Mexico financial regulatory authorities issued a joint statement Monday, prohibiting financial institutions from using cryptocurrencies like Bitcoin (BTC) in the financial system in the country.

The statement just came a day after Mexico Billionaire Ricardo Salinas Pliego’s comments over the weekend, who claimed to develop his bank Banco Azteca as the first financial institutions to accept Bitcoin.

Regulatory watchdogs, including the Central Bank of Mexico (Banco de México), the finance ministry and banking regulators warned the risk of the crypto-assets, saying that the authorities would not consider these “virtual assets” as a “means of exchange, as a store of value or the form of investment” under the current Mexican legal framework, the statement said, according to Reuters.

“The country’s financial institutions are not authorized to carry out and offer to the public operations with virtual assets, such as Bitcoin, Ether, XRP and others to maintain a healthy distance between them and financial system.”

Nevertheless, Banco Azteca was not directly quoted in the authorities’ statement. Salinas , the third-richest tycoon in Mexico, said on Twitter last Sunday, recommending to use BTC, his bank and himself “will be the first bank to accept BTC in Mexico”.

The 65-year-old billionaire owns an estimated $15.8 billion in assets; his businesses are widespread across retail, banking and broadcast sectors. The Mexican fortune has accumulated 2.8 billion more this year. Salinas said last November that around 10% of the liquid portfolio had invested in Bitcoin.

According to CNBC, the Central Bank of Mexico is dealing with domestic inflation aggressively, raising interest rates to 4.25% last week. However, the public is concerned about devaluation as the local inflation rate climbs above 6%. Salinas even has called the “fiat as a fraud” in an interview previously.

The price of Bitcoin was trading at $34,812, slightly up 0.46% during the intraday, according to CoinMarketCap.

Coinbase Allows Crypto Investors to Cash Out in Pesos in Mexico

Coinbase, the largest U.S. cryptocurrency exchange, said it launched a pilot program in Mexico on Tuesday, allowing crypto traders in Mexico to cash out cryptocurrencies in Pesos, Reuters reported.

According to the official coinbase blog, crypto recipients in Mexico can now opt to cash out their balance by generating an exchange code on the Coinbase app that can be used to receive cash at 37,000 retail and convenience stores across Mexico.

For cryptocurrency recipients in Mexico, they can deposit funds in the coinbase app to invest in various cryptocurrencies, a total of more than 100 digital assets including Bitcoin (BTC-USD), Ethereum (ETH-USD) and other current mainstream cryptocurrencies

The service is free of charge for Coinbase customers until March 31, after which a nominal fee of 25-50%, claiming “cheaper than traditional international payment methods” will be charged.

Coinbase wrote that：

“Over time we’ll consider other regions where customers face similar challenges.”

As reported by blockchain.News on January 13, Coinbase is launching a cryptocurrency derivatives service for its clients, announcing the acquisition of derivatives exchange FairX.

Is Mexico the Next to Legalize Bitcoin? Senator Indira Kempis Drops a Hint

Mexican Senator Indira Kempis is set to send a bill to Congress which will seek to legalize Bitcoin (BTC) as a legal tender in the country, in a bid to trail El Salvador.

As reported by online media “El Salvador in English”, the Senator is determined to sponsor the bill this year, believing that failure to adopt the digital currency now can hurt the plans to bring financial equality in the future.

“I have surrounded myself with several people who have worked with bitcoin for years. I have a community of entrepreneurs, of technologists, and of friends who are very knowledgeable and have told me for a long time, ‘you have to be and you have to be part of this world’ And now that I am participating in politics, I seek to promote it,” Senator Kempis said.

According to the lawmaker, Since El Salvador has legalized Bitcoin that has successfully shifted the narratives from the country previously dominated by violence and crimes. She commended that El Salvador is now been looked at in a whole new light.

“It is a historic opportunity that this type of project is being carried out in a Central American country. Every time El Salvador was discussed, it was always to address issues of migration, violence, and organized crime, and now the world’s gaze is not on those public problems, but because of this great call at a global level with bitcoin,” she said.

Besides harnessing the technological advances of Bitcoin and the blockchain tech upon which it is built, Senator Kempis is optimistic that the digital currency can serve as a hotbed for multinational digital assets companies to come set up offices in Mexico.

El Salvador’s adoption of Bitcoin as its legal tender alongside the US Dollar was accompanied by a lot of bold decisions. As Senator Kempis considers the Bitcoin-centric bill proposal, considerations for the rebuttal from both the International Monetary Fund (IMF) and the World Bank should also be factored in.

Mexican Senate Gets First Bitcoin ATM Machine, the Nation Eyes Making BTC Legal Tender

To offer Mexican lawmakers first-hand Bitcoin experience, ChainBytes and Axolotl Bitcoin have put up a Bitcoin ATM at the nation’s senate building.

Senator Indira Kempis teamed up with ChainBytes, a Bitcoin ATM manufacturer, and Axolotl- a Mexican-based Bitcoin ATM operator- to deploy the ATM so that lawmakers could familiarise themselves with BTC transactions.

Staff will get more education about the benefits that Bitcoin mass adoption could render the nation.

Eric Grill, the ChainBytes CEO, welcomed the move and stated:

“We are thrilled to be a part of such a historical moment for Mexico. We hope that by placing our ChainBytes ATM in the senate building, we will help lawmakers get familiar with the technology and hopefully aid their decision to accept Bitcoin as a legal tender in Mexico.”

The Bitcoin ATM is expected to continue operating in the coming months before senators get the opportunity to discuss and vote on a petition by Senator Kempis to make BTC legal tender in Mexico.

Bitcoin becoming legal tender is gaining steam across the globe, given that the Central African Republic (CAR) has taken this route after El Salvador.

With curiosity, will, participation, and interest brewing among lawmakers and regulators in Mexico, Jose Rodriguez sees the Bitcoin ATM in the Senate building as a stepping stone towards more familiarisation.

The CEO and Director of Blockchain Land at Axolotl Bitcoin added:

“We are excited with the current openness in the Mexican Senate, and with Senator Indira Kempis’ effort to bring this Bitcoin ATM and help towards a Bitcoin Regulation that could detonate the Bitcoin and Fintech industry in Mexico as it has happened in other countries.”

The establishment of Bitcoin ATMs is gaining traction because they offer the much-needed infrastructure when buying and selling BTC.

Reportedly, 22 Bitcoin ATMs were installed daily last month, and their preference is growing because they do not necessitate Know-Your-Customer (KYC) requirements needed by crypto trading platforms.

Tether Floats Mexican Pesos-based Stablecoin in Latin America

Tether Operations Limited, the blockchain startup behind the USDT stablecoin, has announced its entry into Latin America with the launch of the Mexican Pesos backed MXN₮ stablecoin.

According to the company, the new stablecoin will be pegged to the Mexican Pesos on a 1:1 ratio and supported on three networks, including the Ethereum, Tron, and Polygon protocols. The company hopes that with the launch of the new token, the bulk of the cross-border transactions or remittances to Mexico can be taken on-chain, thus cutting transfer speed and fees, respectively.

“We have seen a rise in cryptocurrency usage in Latin America over the last year that has made it apparent that we need to expand our offerings,” said Paolo Ardoino, CTO of Tether. “Introducing a Peso-pegged stablecoin will provide a store of value for those in the emerging markets and, in particular, Mexico. MXN₮ can minimize volatility for those looking to convert their assets and investments from fiat to digital currencies. Tether customers in this entirely new market will be able to benefit from the same transparent customer experience.”

Tether is the world’s largest stablecoin with a market capitalization of $73.2 billion, ranking it as the third-largest digital asset per data from CoinMarketCap. The stablecoin is not just the largest but also the most popular, and several blockchain protocols support it. While being accused of market manipulation in the past, USDT has been a successful stablecoin backed by the US Dollar, the Euro, and the offshore Chinese Yuan, which it floated back in September 2019.

Tether Operations Limited said its entry into Mexico would serve as a basis for a more related push in the near future.

“The addition of MXN₮ is a milestone for the company as it marks Tether’s entrance into Latin America with a dedicated digital currency. The launch of MXN₮ will provide a testing ground for onboarding new users in the Latin American market and will pave the way for future fiat-pegged currencies in the region to be launched.”

Image source: Coinbase

Paolo Ardoino: Tether Ranks 22nd in US Treasury Holdings, Surpassing Mexico, Australia, and Spain

Tether, USDT issuer, the leading stablecoin in global circulation, now holds $72.5 billion in U.S. Treasury bills, positioning it as the world’s 22nd largest holder. This development coincides with China’s accelerated divestment from U.S. debt, which has seen a reduction of nearly $481 billion from its peak levels. The contrasting strategies highlight the evolving dynamics of global finance and raise questions about the stability of emerging markets.

Tether’s Growing Exposure to U.S. Treasuries

Paolo Ardoino, CTO of Tether and Bitfinex, announced on September 5, 2023, that Tether’s holdings in U.S. Treasury bills have reached $72.5 billion. (Read Exclusive Article contributed by Tether CTO to Blockchain.News)

This places the stablecoin issuer above sovereign nations like the United Arab Emirates, Mexico, Australia, and Spain in terms of U.S. Treasury holdings.

For many of these communities, USDt is a lifeline to protect themselves and their families from the insane inflation of their national currencies,

Ardoino tweeted.

China’s Accelerating Exit from U.S. Debt

In contrast, China’s ownership of U.S. Treasury debt has seen a significant reduction. According to Wall Street Silver, China’s holdings are down almost $481 billion from peak levels, and the rate of selling is accelerating. “You can see how the line is steepening. China is getting out of U.S. debt and buying Gold instead,” the financial commentary platform noted.

Emerging Markets and Financial Stability

The diverging strategies of Tether and China have elicited mixed reactions. Suraj Chawla of GPU.NET questioned the long-term stability of relying on Tether’s U.S. Treasury holdings as a “financial lifeline” for emerging markets.

Propping up economies on shaky grounds creates a facade of stability, not true resilience,

Chawla stated.

BeastOnChain, a crypto analytics platform, offered a different perspective.

This actually highlights the expansion of emerging markets into the Real World Assets (RWA) and the need for a diversified, borderless approach to help people worldwide engage in these emerging markets,

the platform tweeted.

Implications for Global Finance

The expanding U.S. Treasury portfolio of Tether and China’s accelerated shedding of U.S. debt both highlight evolving trends in international finance. Tether’s role as a financial “lifeline” for emerging markets comes with increased scrutiny regarding the long-term stability of these economies, given its substantial investment in U.S. Treasuries. Conversely, China’s pivot from U.S. debt to gold indicates a strategic realignment of its financial holdings, a move that could have implications for the global economic power structure.

Conclusion

As Tether climbs the ranks of global U.S. Treasury holders, its role in emerging markets becomes increasingly significant. However, questions about the stability of these markets persist. Meanwhile, China’s accelerated exit from U.S. debt could have far-reaching implications for global finance.