Outside of Devcon, Colombians are searching for pragmatic ways to use crypto

One evening last week, three students from the Universidad Sergio Arboleda arrived at a cultural center in Bogota’s posh Chapinero district to learn about cryptocurrencies.

They were there to attend an event called “Integracíon” and it promised to teach them the basics: how to create a wallet, bridge and exchange tokens, claim NFTs and register ENS usernames.

Marquee Conference

John Diego, 20, and Luis Carlos Cabrera, 18, earned degrees in finance; John David, 18, in computer science.

When asked how many of their friends and family were familiar with cryptocurrencies, Cabrera pointed to himself, then to his two friends.

“One, two and three,” he said with a laugh.

A few kilometers away, Ethereum developers and supporters gathered at the Agora Bogota Convention Center for Devcon, Ethereum’s pinnacle conference, which had drawn 6,000 attendees.

They enjoyed presentations with titles like “Unlocking Civilizational Hypercomplexity with Ethereum” and “Recursive ZK Applications and Affordances.”

The gap between crypto’s ambitions and adoption could not be starker.

Devcon comes to Bogota at a time when the industry is struggling to find utility in Latin America. On the one hand, the volatile economies of Venezuela and Argentina have spurred grassroots adoption of cryptocurrencies to address the volatility that has plagued their economies for generations.

Serious potential

On the other hand, cryptowrit large has yet to prove that it can truly improve the livelihoods of households on a mass market basis. In El Salvador, residents say the rollout of Bitcoin as legal tender has been a failure, according to a recent poll. President Nayib Bukele plowed $350 million of the Central American nation’s valuable reserves into Bitcoin only to see the value crater in the worst bear market since 2018.

The Ethereum Foundation, the non-profit organization behind Devcon, has said the choice of Colombia was fortuitous, a matter of venue capacity and visa restrictions rather than local adoption. Nonetheless, it claims to have found “serious potential to grow a significant presence in the community” and the ability to further “real-world use of Ethereum’s technology.”

They still have a long way to go. In conversations with The Defiant, developers, locals and business owners noted that few in the country own or use crypto. And those who do are pragmatic.

Ethereum is not the building block of a decentralized future utopia, but an opportunity to earn or move money, they told The Defiant.

No exchange control

“It’s not because I love Satoshi Nakamoto, nothing like that,” said Daniel Sanchez, who runs an OTC and arbitrage trading desk in Bogota. “I understand, and I think what we are creating here is very special. But I look at it in a very pragmatic way, looking at economics.”

There are three ways Colombians primarily use cryptocurrencies, according to Ignacio Trompiz, head of business development at Reserve, a stable coin protocol and mobile application developer popular in Latin America.

The most common is as a cross-border settlement layer.

“Colombian banking regulations and banking infrastructure are very bureaucratic and kind of oligopolistic,” he told The Defiant. “It’s usually very difficult for businesses to get dollars out of the country or inside the country, even if there are no currency controls.”

The second is arbitrage: buy the dollar-pegged USDT stablecoin at a discount in Colombia, sell it for one dollar in the US, transfer the money home, convert to Colombian pesos and repeat.

“The speed at which stablecoins trade against the Colombian peso compared to the TRM, which is the official one [dollar to peso] the exchange rate for the central bank – there is usually a difference of 2 to 3%, he said. “And a lot of people are wondering why that is.”

Regulatory gray area

Whatever the reason for the spread, several entrepreneurs have set up trading desks in Colombia to take advantage of the arbitrage opportunity, including Sanchez, a 28-year-old from Caracas, Venezuela.

Sanchez was working in finance in Madrid when he heard he could buy cryptocurrency at a discount in Colombia and sell it for a profit in the United States. He decided to move to Bogota.

“When I realized [opportunity] of the arbitrage here, the spread was like 9%, 10%,” he said. “Right now the discount is between 2% and 5%.”

Sanchez requested that The Defiant not use the name of his company, due to the regulatory gray zone crypto in Colombia.

“We’re actually pro-regulation, because we want to say to the banks, ‘look, man, I’m doing arbitrage, and I’m buying USDT here and selling it outside.’ But it’s not that easy,” he said. “The banks, they don’t really like working with cryptocurrencies.”

In his interactions with banks, he never says that his company works with cryptocurrencies. He and other players in the arbitrage industry acquire USDT by buying it peer-to-peer, on platforms like Binance P2P or by negotiating directly with people over the phone.

Hyperinflation

Colombia ranks 15th in Chainalysis’ latest crypto adoption index, bolstered by its high ranking in P2P exchange trading volume. Among the top 20 countries on the index, only Vietnam, which topped the list, had a higher volume of P2P exchanges.

Still, adoption among retail investors is low, Trompiz said, placing it a distant third on the list of ways Colombians use crypto.

“In Venezuela, the hyperinflation was so great that everyone started thinking in dollars,” he said, boosting crypto adoption there. “In Colombia, in Mexico, even in Argentina, it’s very difficult to change cultural perspectives on the way people see their local currency.”

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On Integrationvolunteers helped about 50 locals take their first steps into the cryptoverse, according to Addie Giese of Wgmi, the DAO whose members organized the event.

In a two-story building decorated in dark wood and leather, volunteers who had spent the past two days at university students, local professionals and others came straight to the bar.

Cool experience

In another room far from the chatter, David, the computer science student, said few people in Colombia have heard of cryptocurrencies — something events like Devcon and Integracíon could change, however slowly.

“It was a really cool experience that I won’t forget,” he said. “The most important thing is that … crypto, it is growing up thanks to this conference and this meeting.”

His friend Cabrera was more cautious, saying the industry needed to mature before he would feel comfortable jumping in.

“[Crypto] need more regulations, you need more time, more money, more dedication, he said. “Maybe I will continue with this, but not at this moment … now my priority is the university, my family, etc.”

Their friend Diego was the most experienced, having bought Polkadot, MATIC and several “shitcoins” in 2019, some of which were expensive pump-and-dump schemes.

“That’s when I said that cryptocurrency is a thing when you have to be very careful,” he said. “I got very very greedy … I have to study, research and decide where to put my money so I don’t risk everything.”

Take hold of the market

No one talked about crypto in the high-minded terms that are common at Devcon – something those who spoke to The Defiant had in common.

“I think it’s wonderful, all the decentralization and no managers and all that, but that’s not really what guides me. What guides me is the efficiency of the blockchain,” Sanchez said.

Trompiz believes its use as a cross-border settlement layer will continue to grow. Whether the average Colombian ever picks it up is another matter.

“A lot of projects are starting to appear in Colombia, FinTech projects,” he said. “They have to deal with the market and we have to see … whether we actually solve a problem. Who knows?”