Maria Salgado grew up in a small town in Oaxaca, Mexico, and when an economic crisis hit, following the severe devaluation of the peso, she decided to migrate to the United States. She left in 1996 and made a life for herself in Los Angeles, working at the American Apparel factory and raising her daughter. For 24 years, she sent a significant percentage of her salary home to pay for her sister’s kidney treatments. “Without the money I sent, I’m sure that my sister would not be with us today,” she told Rest of World.
Salgado thought cryptocurrencies were a scam when she first heard about them through colleagues and Facebook ads. But in 2017, she realized that more and more of her friends were getting involved in crypto, and that’s when she became a convert. “I realized we were all fighting for the same thing: to have a better life.”
Salgado is now part of a growing number of Latin Americans using cryptocurrency to transfer money from the United States south of the Rio Grande. They represent a new wave of crypto users who are not tech enthusiasts or white-collar financiers but rather working-class people whose livelihoods depend on a technology that is often seen as experimental.
The savings in commission fees makes crypto remittances a gamble worth taking for low-wage migrants. Before Bitcoin, like most migrants, she would send her money via the international transfer companies Western Union, MoneyGram, or Vigo. They all charged her, on average, $10 for every $200 she sent. Meanwhile, companies like Mexican crypto exchange Bitso charge commissions as low as $1 per $1,000 sent.
Jesús Cervantes González, an economist with the Center for Latin American Monetary Studies (CEMLA), told Rest of World that the pandemic led migrants to search for digital solutions to send money home. Many traditional exchanges closed their doors to the public, even as remittances steadily rose between 2010 and 2020, increasing by 8.3% in 2020. They went down for only two months in 2020, when Covid-19 first started spreading widely in the U.S. and unemployment for Latinos surged — from 4.8% in February 2020 to 18.5% percent in April 2020.
Salgado had already been sending money via Bitcoin since January 2020 by the time the pandemic hit in March. She had explained to her sister in Mexico how to install a wallet on her cellphone, enabling her to go to her local bank to withdraw those funds as Mexican pesos.
The remittances were critical during the course of the pandemic. The Mexican government did not launch a federal stimulus program, even as millions of people lost their jobs. Numerous media outlets stated that more Mexicans received money from the U.S. stimulus package via remittances than through any Mexican government benefits. (Cervantes said there are no statistics to prove such a claim.)
Regional instability has driven crypto-remittance adoption across Latin America. In economies affected by hyperinflation, the relatively volatile fluctuations of cryptocurrencies are actually more stable than those in fiat currencies. Take Venezuela, where the bolivar fell sharply, the annual inflation rate rose by 6,500% in one year, and foreign currency became scarce due to sanctions.
As a result, many Venezuelans turned to crypto. Alberto Alarcón, a former publicist from the city of Maracay, started investing in Bitcoin to support himself back in college seven years ago. He told Rest of World how he saw people acquire cryptocurrency through remittances while others turned to gig work — selling video game tokens or posting blog entries for Steemit, a social media platform that pays writers in proprietary cryptocurrency. The government even started its own cryptocurrency, the Petro, which is backed by national oil reserves.
Alarcón used his experience to launch BitcoinBall, a crypto exchange based in Venezuela geared toward building a crypto-remittance pipeline for the over 5 million Venezuelans living abroad who want to send money back home, with a focus on those living in neighboring Colombia. His business partner contacts people through Facebook and Instagram and offers their services to send crypto using a Binance wallet or the government-backed Petro Wallet.
Mexican crypto exchange, Bitso, processes 2.5% of remittances going into Mexico — over $1 billion a year.
“It’s much better to save your money in cryptocurrency, since our local currency, the bolivar has devalued [on average] between 10% and 20% every month,” remarked Alarcón.
Meanwhile, the Mexican cryptocurrency exchange Bitso now has one million users across the region. The company’s founder, Pablo González told Rest of World that Mexico is ripe for crypto adoption, driven by the remittance economy: While in 2020, 88% of Mexican households had a smartphone, less than 50% had bank accounts.
However, González does recognize that he was naive in his hopes for how quickly and widely adopted among ordinary Mexicans crypto would be. Neither is he ignorant of the fact that a large percentage of Bitso’s million users are just investors looking to make a profit.
In 2020, Mexicans living in the United States sent over $40 billion to their families back home. The majority of these transactions were done via traditional transfer services, but Bitso is keen to capture a share of that market. By the company’s own reckoning, it already processes 2.5% of remittances going into Mexico — over $1 billion a year.
The sheer size of this market makes the technological hurdles and distrust surrounding cryptocurrencies worth overcoming. For over a year, U.S. crypto exchange and investor in Bitso, Ripple, worked with MoneyGram to serve as a back-end system for the conversion of dollars to currencies like the Mexican peso.
Bitso recently tried an experiment in Illinois with a supermarket in an area with a large number of migrants from the small city of Huitzuco, Guerrero. Bitso installed an ATM on location that allowed migrants to send money directly to their families back in Mexico using WhatsApp.
Salgado is back home in Oaxaca now, but she probably would have appreciated experiments like Bitso’s ATM machine. She said that, even though many of her colleagues in the U.S. trust certain cryptocurrencies, they still do not send their money home via crypto because of the high technological barriers that exist to buy and convert it.
Salgado personally has advanced beyond simple money transfers and is now a cryptocurrency miner and investor. The ex-seamstress is currently invested in a crypto-mining rig — an advanced processing computer that mines cryptocurrency — being run out of Arizona. She also teaches cryptocurrency workshops online. Salgado, it would seem, has gone from skepticism to adoption to full-blown convert. To her, crypto is no longer just a convenient financial tool, it is a way of life verging on the devout.
“Like a chicken stuck in the coop” is how Salgado said she felt before investing in Bitcoin and quitting her factory jobs to make money via what she calls crypto “marketing networks”. “I needed to fly like an eagle and to leave that comfort zone,” she said. “I came to realize that I would never get anywhere earning minimum wage.”
“Marketing” is the term Salgado uses to refer to the networks that she formed in Los Angeles among her coworkers and friends, through which she advises people on cryptocurrency investment and mining, earning commissions as people join. They used to meet up every Friday at a McDonald’s in South Central LA.
Like Salgado, Gustavo G. Grillasca teaches Mexicans who are interested in entering the world of cryptocurrency, from his home in Mexico City. He shares González’s vision that cryptocurrency should be accessible to ordinary Mexicans and is bitterly critical of the traditional financial system. “The dollar is used as a political weapon,” Grillasca told Rest of World. “Bitcoin is a neutral currency that is not designed to serve certain political interests.”
But for working-class crypto users, to choose to use crypto is often about choosing how to store and move their lives’ earnings. It is a situation that potentially incentivizes conflicts of interest.
For instance, when asked whether the structure of her marketing networks seemed like a pyramid scheme, Salgado replied: “Life itself is a pyramid scheme. In a household, there is one father; at work, there is one CEO; and, in a country, there is only one president. This type of business model is like a pyramid, but it stands apart from fraudulent Ponzi schemes, which is what people think of when someone tells them about marketing networks.”
It is a tribute to how new crypto really is, despite all the recent media attention, that the lines between ideology, speculation, and practical finances can get so blurred.
According to the World Economic Forum, the adoption of digital remittances could drive sustainable development, while saving families money in remittance fees.
Yet, the many concerns about cryptocurrency — from its lack of regulation, its volatility, its enormous use of energy, and its attractiveness to crypto-cult preachers — will linger on as different parts of society come to terms with it in their own ways.
For their part, Salgado and Grillasca are confident about the future of cryptocurrencies, both for remittances and building wealth. Both continue to teach workshops in the hope of converting Latin Americans to their beliefs.