According to a Chainalysis report, Latin America is the second economy with the lowest growth rate in cryptocurrency adoption in the last year, despite the strong economic problems facing the region.
Latin America is one of the regions considered to have the highest adoption of cryptocurrencies, and digital assets, both as assets for the exchange of value or acquisition of products, as investment instruments and as a store of value. However, a recent report issued by Chainalysis, a research and intelligence firm blockchain, reveals that the region showed one of the lowest growth rates in relation to the adoption of digital assets.
Although the full report will not be available until late September, the intelligence firm released an excerpt summarizing the most important data from the investigation. In this regard, Chainalysis states that Latin America has one of the smallest economies by transaction volume, with $25 billion sent in cryptocurrencies and $24 billion received in these digital assets over the past year.
According to these data, Latin America is only ahead of Africa and the Middle East, but it maintains a low profile compared to giants such as China, the United States, the United Kingdom, among others.
“The region accounted for between 5% and 9% of all cryptocurrency activity in a given month over the past year.”
Thus, contrary to what many consider, the region is one of the most static crypto economies in its development according to the Chainalysis study.
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Benefits of cryptocurrencies in the Latin American economy
Since its launch in 2009, Bitcoin Cryptocurrencies have shown great potential to address several of the fundamental problems that exist within the traditional financial system. Mainly, the development of cryptocurrencies has made it possible to solve the problem of high transaction costs and waiting times when sending international remittances. Cryptocurrencies, being mostly decentralized digital assets, allow cross-border transactions without considerable waiting times or high transaction commission costs.
On the other hand, Latin America is one of the regions in the world that receives the largest number of remittances per year. Thus, thanks to the multiple advantages and benefits offered by cryptocurrencies, it is logical to think that the rise and growth of these digital assets should be exponential in this region, which should enjoy a high volume of transactions carried out with these assets.
“Given the importance of remittances in the region, Latin America is a place where we would expect to see such activity.”
Likewise, the enormous economic and financial challenges currently being experienced due to the global economic crisis are driving the use and adoption of cryptocurrencies in scenarios that test digital assets to demonstrate their full potential.
Cryptocurrency remittances in the region
The largest volume of transactions with cryptocurrencies and digital assets is controlled by powerful countries such as the United States, China or the United Kingdom, among others, so it is not surprising that a large part of the cryptocurrency remittances entering Latin America come from these countries.
“It is not surprising that North America is well represented here, as the United States is the largest source of remittances to Latin America.”
According to the statements of Patricia Risso, Head of Regulatory Risk at the cryptocurrency exchange Bitso, cryptocurrency remittances from the United States to Latin American countries, such as Mexico, Brazil, and Venezuela, are a common use case for the exchange platform’s users and customers.
Source: Chainalysis
However, the chart also shows that a large portion of cryptocurrency remittances entering the region come from East Asia, which is an important counterpart for Latin America. Chainalysis' research shows that many of the payments received from East Asia are the result of negotiations and commercial activities between Asian exporters and Latin American companies, which purchase their products at very good prices in the region to sell them at retail.
Cryptocurrencies as an exchange system and store of value
The economic situation in several Latin American countries, mainly in Venezuela and Argentina, is driving the use of cryptocurrencies as a feasible solution to address current inflation and banking problems. Both citizens and companies are facing serious problems with banks and financial institutions.
"A lot of people here have uneven incomes because they work for Uber or similar places, which makes it difficult for them to get a bank account."
If citizens and businesses do not have easy access to traditional financial and banking services, then they turn to the use of cryptocurrencies and digital assets as a means of conducting transactions and as a store of value.
Sebastian Villanueva, administrator of SatoshiTango, a web portal for cryptocurrency operations based in Chile, believes that, after Bitcoin, the stablecoins (stablecoins) such as DAI y USDC represent two of the best assets for Latin Americans looking to lock in and preserve the value of their savings.
Other issues driving cryptocurrency adoption in Latin America
The constant devaluation and instability of fiat currencies in Latin America is another important factor driving the adoption and use of cryptocurrencies in the region. According to Chainalysis, first-hand information from several exchanges and cryptocurrency exchanges reveal how economic problems are driving users to their platforms.
“Venezuela and Argentina especially are printing money like crazy, so their fiat currencies are losing value. That drives a lot of cryptocurrency adoption.”
Villanueva says that the limitation on the acquisition of foreign currencies in some countries such as Argentina is also leading citizens to look for much safer savings options such as cryptocurrencies. In summary, Chainalysis concludes that Latin America has the potential to make cryptocurrencies an asset of great importance for the exchange of value and the reserve of value, as well as an important asset among important investors.
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