The Rise of Cryptocurrency in Latin America: A New Economic Wave

Understanding the Crypto Surge

In a world where economic stability often feels like a myth, Latin America is bucking the trend, thanks to a surge in cryptocurrency transactions. Chainalysis, a blockchain analytics firm, estimates that there have been about 200,000 crypto transactions over the past year, amounting to over $1 billion in trades between Latin America and Asia. This research showcases how crypto has become a lifeline in times of economic turbulence, acting as a bridge in cross-border dealings.

Market Dynamics: A Crossroad of Cultures and Economies

The study titled Latin America Mitigates Economic Turbulence with Cryptocurrency, reviewed data from July 2019 to June 2020, pointing out the unique patterns of crypto usage driven by specific regional needs. With North America and Western Europe as the biggest sources of fiat remittances to Latin America, it’s interesting to see that East Asia tops the charts in terms of crypto transaction volume.

• Commercial transactions are especially notable, namely those between exporters in Asia and companies in Latin America.

Diverse Drivers Across Borders

Interestingly, the factors spurring crypto adoption vary widely across Latin America’s countries. Kim Grauer, head of research at Chainalysis, indicates that differing political climates and banking systems lead to diverse motives for embracing cryptocurrency. She notes:

“The use of P2P exchanges is a key service for adoption in Venezuela, a large professional market drives adoption in Brazil, and a substantial commercial market influences Argentina, Paraguay, and Brazil’s trading, often focusing on goods imported from China.”

Banking Woes Fueling Crypto Adoption

Even banks seem to contribute to the rise of digital currency. Luis Pomata, co-founder of the Paraguay-based exchange Cripex, highlights a significant concern among banks: money laundering. The scrutiny has made the banking application process a lengthy ordeal for many companies, with many being outright rejected.

This complex banking landscape has propelled numerous individuals toward cryptocurrencies, as many simply can’t get bank accounts, thus driving adoption across the region.

The Growth of Local Exchanges

July saw a milestone for Bitso, one of Latin America’s leading cryptocurrency exchanges, as it celebrated reaching 1 million users, right before making its big splash into the Brazilian market. Santiago Alvarado, Bitso’s director of cross-border payments, connects the exchange’s success in Argentina to soaring crypto engagement and a growing appetite for cross-border payments.

This explosive growth is a testament to the adaptability of the region amidst economic challenges, paving the way for a new era of financial interactions fueled by cryptocurrency.