Page 54 - Trends in Telecommunication Reform 2016

Box 1.18: Key lessons: meXBT, Mexico, 2014
• mexBT received funding in bitcoin from Seedcoin, an incubator, to develop a trading
platform. Seedcoin’s strong knowledge of bitcoin benefited mexBT. In very nascent
markets, it is important to select partners that have a strong market knowledge, as this
can determine the success of the start-up.

• Governments can promote the development of the digital currencies market by
implementing adequate regulation. This framework should protect consumers and
increase their trust and co

Case study: meXBT, Mexico 1.6.4 Charity or non-profit institutions

This case study demonstrates how governments Some charity or non-profit institutions are
can promote the development of the digital involved in financing businesses. Their investments
currencies market by implementing adequate normally are related to the mission of the
regulation. meXBT is a platform for trading digital institution, and businesses eligible for this type
currencies such as bitcoin and litecoin. One of its of financing usually are seen as promoters
objectives is to cater to the remittances market, of economic or social development. Start-up
particularly between Mexico and the United States. companies are typically the beneficiaries of this
The company is based in Mexico and provides type of support.
services in Latin America. mexBT seeks to help the
"un-banked" population move money using mobile For entrepreneurs, this funding approach
phones. The company partners with cash-payment usually means not having to give up equity in
processors to facilitate deposits and withdrawals. their companies to investors. The amounts
made available through such funding can vary
The company required funding to develop its significantly. Fundación Bavaria in Colombia claims
trading platform, so it applied to receive support to have financially supported 388 start-ups with a
from Seedcoin, which invested BTC 250 in mexBT total of USD 8 million . This support represents
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in 2014 . At the time, this amount corresponded an average of USD 22 000 per business. In the UK,
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to about USD 150 000 (after bitcoin’s precipitate Nesta, an innovation charity, supports businesses
drop in value the next year, that value was closer seeking first-phase investments of between GBP
to USD 62 000) . The equity share Seedcoin 150 000 (USD 235 379) and GBP 1 million (USD
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received for its investment was not disclosed, 1.57 million).
but it typically varies between 10 and 20 per
cent . meXBT claimed that the support from The investment risk is usually high, because the
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Seedcoin was very important not only for funding beneficiaries typically are start-ups, but the goal
but also from a mentoring perspective, due to usually isn’t getting a return on investment as
the incubator’s expert knowledge of the bitcoin much as achieving expected socio-economic
market. In November 2014, mexBT launched its gains through the start-ups. Often, this kind of
trading platform. funding involves local non-profits supporting
the needs of local entrepreneurs, giving them a
The investment risk for Seedcoin was very high, foundation to develop and to become attractive
because meXBT was a start-up when it received the to other investors. These funding initiatives may
funding support. The currency’s volatility added to be spurred by financial regulations. For example,
the risk by making the value of the funding amount a government might provide tax breaks to
uncertain. In March 2015, the UK government institutions that support businesses or projects
began regulating bitcoin exchanges to prevent with a positive social or economic impact.
them from being used for money laundering, an
initiative applauded by the UK Digital Currency
Association as being very important to increase the
adoption of digital currencies.

36 Trends in Telecommunication Reform 2016