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According to a recent survey, the three main factors affecting the spread of crypto in Latin America are remittances, currency problems and profit seeking.
A Chainalysis survey released on October 20 showed that the value of crypto assets acquired by people in the seventh largest crypto market in the world increased by 40 percent between July 2021 and June 2022, reaching $562 billion.
Experts believe that remittances played a role in the increase. Reportedly, the region’s total remittance industry will reach $150 billion by 2022. The uptake of crypto-asset-based services was “uneven, yet rapid,” according to Chainalysis.
The company cited a Mexican exchange that was part of the “world’s largest crypto transfer corridor” and handled over $1 billion in transfers between Mexico and the US in the year to June 2022.
It represented 4 percent of the country’s money transfer market and increased by 400 percent annually. According to the research firm, the region’s high inflation rates have also significantly affected the use of crypto, particularly the use of stablecoins linked to the US dollar.
“Stablecoins – cryptos designed to remain pegged to the price of fiat currencies such as the USD – are a favorite in the region’s most inflation-ravaged countries,” the company said.
Furthermore, according to an estimate by the International Monetary Fund, the five main Latin American nations had inflation in August of 12.1 percent, a 25-year high. The region has struggled with alarmingly high inflation rates.
This has led ordinary consumers to take and keep stable coins to make their routine transactions to protect themselves against weakened national currencies.
Over a third of users already use stablecoins to make regular transactions, a June Mastercard survey revealed in the paper. The use of stablecoins for modest retail transactions (under $1,000) was found to be most prevalent among people from Venezuela, Argentina and Brazil, according to Chainalysis.
Interestingly, the survey found that people were also inclined to use crypto-assets as currency in larger and more sophisticated Latin American countries.
With over 45 percent of all crypto asset transaction volume occurring on DeFi platforms, Chileans were the most active users of decentralized finance (DeFi), closely followed by Brazil at just over 30 percent. With a value of around $150 billion, Brazil was the region’s largest recipient of crypto assets.
“Latin America’s more DeFi-centric crypto markets are not unlike those of Western Europe or North America, where market participants are embracing cutting-edge, return-focused crypto platforms more than savings-centric centralized services,” Chainalysis said.
The author is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash
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