Why Crypto Adoption In Latin America Is Gaining Steam
Cryptocurrency has been unable to shake off the skepticism of governments and regulators in many parts of the world, with both China and the U.S. implementing rules that restrict its use. However, it’s a completely different story in Latin America, where governments across the region have been much more receptive to the benefits that crypto can provide in their societies.
It’s because of this openness to crypto that many South and Central American countries rank among the top nations in the world in terms of crypto adoption. A study by Sherlock Communications last year suggested that more than 18% of Argentineans own crypto, for example. Brazil is even friendlier, with a full 25% of respondents stating that they plan to purchase crypto within the next year, the same survey found. “That equates to 36 million Brazilians with plans to purchase crypto, and represents a 91% increase from just over 13% of the population who have already purchased a cryptocurrency or token to date,” Sherlock Communications wrote.
Meanwhile, the speed of adoption is accelerating even faster in other Latin American countries. For example, 12% of respondents in Peru said they plan to buy crypto within the next 12 months, compared to just 1% who currently own some. Moreover, Mexico is forecast to see crypto adoption accelerate by an incredible 345%, the same survey found.
But why is this happening in Latin America specifically? To understand that, we need to look at the unique conditions in this part of the world that are making people more receptive to alternative forms of money.
Financial Instability
One of the biggest motivating factors behind crypto adoption in Latin America seems to be the plague of financial instability across the region, which has forced people to look for new ways to protect their wealth. Those who kept their savings in local bank accounts have paid a heavy price for their blind faith in traditional financial institutions. For instance, both Argentina and Brazil have experienced financial difficulties in recent years, with high inflation rapidly eroding the value of local currencies and impacting their citizen’s savings. Meanwhile, Venezuela’s problems need no introduction - the country has struggled for years with hyperinflation, with reports from some areas suggesting that local people have taken to weighing bags full of local currency rather than counting it.
Cryptocurrency provides citizens with access to a much more stable alternative. While crypto is still fairly volatile, the fact is that the value of most tokens goes up and down as often as a rollercoaster, while most Latin American currencies stick with a consistent downward trend. By keeping their savings stored on a digital ledger, Latin Americans can preserve the value of their assets. They’re confident that even if Bitcoin is in a bear market, it is very likely to bounce back in the not too distant future, making it a far more attractive haven than trusting in their government to handle the current financial crisis.
Millions Unbanked
Another attraction of crypto in Latin America is that it’s far easier to set up a digital wallet than it is to obtain a local bank account. Data from the World Bank suggests that as many as 50% of people in Latin America have no access to the traditional banking system. It means these people have no way to protect their financial assets, other than to stuff wads of notes under their mattresses and hope for the best.
A similarly telling statistic is that just 113 million people in Latin America have access to credit cards, according to Statista. That means barely a fraction of Latin American citizens are able to access financial services beyond simple savings. ¡
Crypto provides a much more accessible alternative, opening the door to an alternative financial system termed “decentralized finance”. To access cryptocurrency and become your own bank, all that is needed is a smartphone and an internet connection. Everyone is free to download a digital wallet with no censorship, meaning anyone can hold digital assets. Meanwhile, internet penetration in Latin America is expanding rapidly. With no alternative to holding cash, crypto is emerging as a very attractive and much safer alternative.
Simple Remittances
When it comes to sending money abroad, you cannot beat crypto. Compared to traditional services such as Western Union, crypto-based remittances are an incredibly cheap and fast way of sending money across borders. That’s why there has been a rapid increase in the number of Latin Americans who use blockchain technology to send funds back to their friends and families.
The remittances industry has been accelerated by a wave of startups enabling easy, cross-border payments with crypto and off-ramps to local fiat. For instance, the Mexican crypto exchange Bitso says it alone handled $1 billion in crypto remittances between Mexico and the U.S. year to date for 2022.
Remittances between South American nations are also growing. Venezuela’s economic troubles over the last decade have resulted in millions of people heading to Colombia next door, and those that have done so, often try to send money back to their loved ones who remain at home. To ease this process, Colombian crypto startup Valiu has built a blockchain-based remittance network that helps economic refugees transfer money to their relatives in Venezuela in a matter of minutes, with minimal fees involved.
Widespread Acceptance
Perhaps the single biggest factor behind crypto’s surging popularity in Latin America is its growing acceptability as a payment mechanism. As more people learn about and use crypto, more are willing to accept it in lieu of their local currency. A study by the now-defunct Bitcoin trading platform LocalBitcoin in 2019 found that there were around 1,800 local BTC transactions in Venezuela each week, as people increasingly embraced digital money to pay for products in online stores.
Meanwhile, big name franchises like Burger King have begun accepting crypto payments in Venezuela, preferring it as a more stable alternative to a local currency that can lose 10-times its value in the space of 24 hours.
Then there are startups like Costa Rica’s Nimiq, which is building a blockchain-powered payments ecosystem that’s designed to make crypto easy to use for anyone. Nimiq’s Criptociudad initiative is forging a cross-border network of stores, businesses, and individuals, making it simple for anyone to accept cryptocurrencies like Bitcoin and Ethereum. Its Cryptopayment.link service is a web-based point-of-sale system that works on any connected device, enabling stores to invoice for goods in U.S. dollars and receive the exact amount in crypto when it’s paid. In other words, it enables all payment transactions to take place in crypto. Nimiq’s Cryptopayment.link is just one part of an extensive and growing ecosystem of applications for businesses that wish to adopt crypto, with other features including a crypto wallet, games, a blockchain explorer and crypto-to-fiat atomic swaps, all built around its native NIM token..
Crypto Gaming
An often overlooked trend is that Latin America’s population is somewhat younger than most other parts of the world. Younger people traditionally tend to be more open to new technologies and crypto especially has won over a lot of people who’re suspicious of their governments and traditional finance.
Young people are also the primary audience for a new generation of blockchain-powered video games, which are attracting lots of attention in Latin America. For instance, the Latin American Gaming Guild has emerged as one of the top play-to-earn gaming communities, renting out NFTs to the most promising Latin American gamers and giving them the opportunity to earn crypto rewards in games like Axie Infinity, Door Dash, and PlaceWar.
One of the fastest-growing metaverse platforms over the last year is Upland, which is building a virtual world that’s mapped directly to the real world. It’s home to full-scale replicas of some of the world’s biggest cities, including many Latin American metropolises, like Buenos Aires.
Upland shot to fame during last year’s FIFA World Cup in Qatar as FIFA’s official metaverse partner. It’s home to a world of play-to-earn games and virtual business opportunities, and sees Latin America as a region that’s ripe for expansion, as evidenced by its recent partnership with the Argentinean Football Association and the news that it’s bringing Rio de Janeiro’s famous carnival to the metaverse.
Relaxed Regulations
Latin American governments have been quick to recognize both the popularity and promise of crypto and have been incredibly receptive to the idea, in contrast to many other parts of the world. While the U.S. seems intent on increasing regulation of crypto, the narrative in Latin nations is far different and the environment for crypto businesses proving to be much friendlier.
In Brazil, for instance, the country’s central bank has already moved to accept crypto as a legal asset for the calculation of payments. In 2019, Brazil’s internal revenue service reported more than $3.5 billion in cryptocurrency payments that year, and that number has been rising ever since.
The Colombian government has also warmed to the idea of crypto, and has been evaluating the use of blockchain to monitor and implement various funding programs, including a school meals program. One of the reasons it gave was blockchain’s ability to counter corruption, which is very common among low-level officials in Colombia. By utilizing the immutable nature of blockchain, it hopes to distribute government resources in a more transparent way.
By far and away the best example of crypto openness is El Salvador, which famously became the first country in the world to adopt Bitcoin as legal tender in 2021. El Salvador’s President Nayib Bukele is a major advocate of crypto, and was behind the launch of the country’s official Bitcoin wallet. He has also sponsored initiatives such as volcano-powered cryptocurrency mining and wants to build a Bitcoin-themed city. His hope is that businesses in the country will accept Bitcoin for day-to-day transactions, though he has faced opposition from international organizations like the IMF.
Despite a somewhat troubled rollout of Bitcoin in El Salvador, Bukele remains firmly convinced that crypto will help to improve people’s lives.
Overall, Latin American governments have been very positive about cryptocurrency, seeing it as a potential savior in a world where corruption is rife and very few people have access to traditional banking.
Driving Global Adoption
The incredible growth of crypto in Latin America is a result of its populations’ overwhelming optimism that digital money is the future. It’s a region of crypto believers and a place where many are convinced it can help to unlock a more prosperous and stable financial future. Businesses and citizens alike are enthusiastically embracing the future of money, and crypto is rapidly becoming a normal way of doing business. Latin America is likely to be the first region in the world to see widespread crypto adoption, and when it does it can serve as a shining example for the rest of the planet to follow.
***
DISCLAIMER
The views, the opinions and the positions expressed in this article are those of the author alone and do not necessarily represent those of https://www.cryptowisser.com/ or any company or individual affiliated with https://www.cryptowisser.com/. We do not guarantee the accuracy, completeness or validity of any statements made within this article. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author. Any liability with regards to infringement of intellectual property rights also remains with them.