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Michael Nagle/Bloomberg
Coinbase
is expanding into the global payments business by launching a cryptocurrency remittance pilot program in Mexico.
The crypto exchange platform has partnered with
Remitly Global
(ticker: RELY) to allow U.S. customers to send cryptocurrencies to recipients in Mexico, who will immediately be able to cash out their crypto holdings in their local currency.
“Coinbase’s (
COIN
) mission is to increase economic freedom around the world, and this new product is core to enabling that mission,” the company wrote in a blog post on Tuesday. “We want to make it fast and easy for users to send crypto to anyone in the world, and allow recipients to participate in the cryptoeconomy.”
Currently, Coinbase customers have the ability to send crypto to recipients in Mexico directly from the app using a person’s email address. But the new pilot gives the recipient the option to generate a redemption code from the Coinbase app to retrieve cash at more than 37,000 physical retail outlets across Mexico.
Recipients will need to verify their identity by providing their legal name, date of birth, and home address to pick up the cash.
The service will be free through March 31. After that date, as with most international money transactions, transactions will incur a cost which Coinbase has yet to disclose. However, the company said the nominal fee would still be “25-50% cheaper than traditional cross border payment solutions.”
The pilot is part of Coinbase’s plan to scale globally and push crypto as a solution for improving access to financial services for underbanked communities across the world.
Coinbase said it was working on making this pilot available in more regions soon.
The shift toward remittances could also be a profitable move for Coinbase. Global remittances totaled $702 billion in 2020, according to the World Economic Forum. Remittances tend to carry hefty fees for senders. For smaller remittances, fees average 7% and can be as high as 15% to 20% in some smaller migration corridors, according to the International Monetary Fund. In the U.S.-Mexico corridor, competition had driven remittance fees down to around 5% for $200 by 2017, the IMF found.
Coinbase announced earlier it would hire 2,000 employees to capitalize on “enormous product opportunities ahead for the future of Web3,” a third-generation of the internet based on blockchain technology.
Coinbase stock was up 6% to $206.80 on Tuesday.
Write to Sabrina Escobar at sabrina.escobar@barrons.com