'Emerging Market Stablecoins' Are Finding Product Market Fit
Image of a 20 Mexican Peso bill which is equivalent to one US dollar (19.738800 pesos) in Mexico ... More City, on June 2, 2022. - A stable political outlook in the face of uncertainty in Colombia, Brazil and Chile, and an attractive financial yield are encouraging a surprisingly strong Mexican peso, despite the country's tepid economic outlook, experts say. (Photo by Pedro PARDO / AFP) (Photo by PEDRO PARDO/AFP via Getty Images)
US dollar-pegged stablecoins like USDT and USDC are all the rage this year, but tokens denominated in local market currencies are starting to find product market fit.
Bitso, the Mexico-based crypto platform with operations across Latin America, has launched a new stablecoin pegged to the Mexican peso.
Announced at the Merge Buenos Aires conference on March 25, the MXNB stablecoin will live on the Arbitrum network, an Ethereum Layer 2 network that has become a popular rail for stablecoins in emerging market countries.
The idea is that MXNB will allow foreign companies doing business in Mexico to more easily convert in and out of Mexican pesos, thereby making it easier to offer products and services to Mexican customers.
Similar products have gained traction in the Latin America region as of late.
Bitso recently joined forces with Mercado Bitcoin and Foxbit to launch a Brazilian real-pegged stablecoin called BRL1. Brazil's Braza Bank announced a real-pegged token of its own on the XRP Ledger in February.
These products join the party of other BRL-paired stablecoins such as BRZ — issued by Transfero, and BRLA — issued by BRLA Digital — that have been operative in the market for several years.
USD stablecoins comprise the majority of the market due to their liquidity and convenience. They provide an easy way access to dollars for those seeking a store of value, and are ubiquitous in the crypto trading world.
However, soft currencies don't possess these same characteristics, and users don't generally want to hold them for any prolonged period if there are better options available.
So why the newfound interest in these stablecoins pegged to local currencies?
The short answer is market access. These tokens serve as a bridge for individuals and businesses looking to on and off-ramp into new markets to offer products and services denominated in the local currency.
Ben Reid, Head of Stablecoins at Bitso Business, explained:
Stablecoins are now understood to be a fast, cost-effective solution to this problem, offering an alternative to traditional fiat rails for expanding access to foreign markets.
In this regard, local stablecoins can be seen as the bridge between global capital and local usability. They enable international businesses to collect payments and pay salaries, vendors and customers in local currency and via local payment rails like Pix, in the case of Brazil.
Lucas Giorgio, co-founder of BRLA Digital, explained that drop-off rates can be as high as 80% in Latin America when users are forced to transact in US dollars rather than their local currency.
For Bitso, these local currency stablecoins are a core component of its business strategy for the remainder of the year. It has launched a subsidiary called Juno, that will live underneath its Bitso Business division, that is focused on issuance and management of digital assets like stablecoins.
Bitso Business will also host Latin America's first conference devoted to stablecoins on August 27-28 in Mexico City.
Why the newfound interest in non-dollar pegged stablecoins? Ben Reid, Head of Stablecoins at Bitso Business, explained that the value proposition of stablecoins denominated in local currencies is market access for international players.
, crypto trading on international exchanges (USD-denominated trading pairs tend to be more liquid)
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