Crypto, is 2022 the year of Latin America?

cryptocurrency in latin america

Latin Americans have all turned to virtual money for a safer and more profitable option. Especially bitcoins.

For millions of Latin Americans, cryptocurrency represents a quick way to receive resources sent by relatives who work abroad.

According to Robeco's latest report, Latin America is home to a population of roughly 450 million mobile phone users, which is expected to reach 484 million by 2025. In countries such as Chile, Peru, Argentina, Brazil or Mexico, rather than moving from cash to credit cards and electronic payments over the span of several decades, new internet users will typically go straight from cash to digital wallets, as many of them will get a smartphone before they even open a bank account.

In this framework, Latin America has experienced a consistent and massive rise in cryptocurrency, including its fundamental blockchain technology. That’s why experts think the region has become a new spotlight on the crypto-economy boom.

Crypto Statistics for Latin America

According to the latest figures published by Chainanalysis, many Latin American countries have regulations concerning cryptocurrencies. As underlined by ECLAC, there has been widespread acceptance of cryptocurrencies and bitcoins in Latin American countries recently. However, this was as a result of the local currencies that have depreciated.

People who live in these countries understand that keeping their money in banks using their local currencies may lose their money. This is why their investments are majorly cryptocurrencies, having understood better value is associated with cryptos compared to the Government’s currencies.

Thus, it is easy to understand why robust trading is one of the main points responsible for the quick and widespread cryptocurrencies in the Latin America area. While Brazil is the leading country in this aspect of cryptocurrency, followed by Venezuela. Latin American countries have sent cryptocurrencies worth $25 billion, receiving about $24 billion worth of crypto. According to data, professional traders make about 80% of monthly volume transfer, the whole amount of crypto sent and received is about 5% and 9%, respectively, of the world’s crypto.

A rough time for crypto?

Despite it has been a rough time for crypto, the LatAm region saw use of cryptocurrencies rise by 1,370% from 2019 to 2021. But there is another chapter to this story, a chapter that began in 2021 with the approval of cryptocurrency as legal tender in El Salvador. Last year, El Salvador became the first in the world to approve a cryptocurrency—in its case, Bitcoin—as official legal tender.

However, fun fact, the country has lost almost $40 million with crypto since the September 2021 adoption, but the debacle didn’t stop crypto’s growth: in 2021, the value of crypto firms in Latin America grew tenfold from $68 million to $650 million.

Countries across the region are now considering legislation to both promote and safeguard usage of these products. Brazil and Argentina both have income tax weighed upon all cryptocurrencies, while Venezuela and Chile have approved the use of cryptocurrency, but is not acceptable for daily merchant and retail trades.

Let’s see today those countries in the Latin American countries at the forefront of crypto and its regulation. With an outstanding outsider.

Cryptocurrency in Brazil

Valued at $27.6 billion a year as of April 2022, Brazil is the largest crypto market in the region. That volume makes Brazil a hub for crypto-related venture capital. For example, Latin America’s first cryptocurrency unicorn, Mercado Bitcoin, is Brazilian, moreover, according to the 2022 Global State of Crypto Report Brazil has the highest percentage of its population owning crypto in Latin America.

The Government is in the process of developing a regulatory framework. On April 26, the Brazilian Senate passed a bill that governs virtual assets, including Bitcoin and tokens. The bill includes provisions that both define virtual assets and create rules for day-to-day usage. Providers must follow guidelines to safeguard clients’ funds and personal data. It also installs penalties for fraud, which totalled $503 million in 2021.

Cryptocurrency in Argentina

The appeal of bitcoin in Argentina has largely been caused by the instability of the peso, which is experiencing year-over-year inflation of over 55%. Argentines once looked to keep their assets in dollars or euros, but crypto flow in Argentina reached $103 billion in 2021. According to Bloomberg, the number of companies paying their employees partly in crypto increased 340% over the last year, making Argentina the country with the highest percentage of crypto-paid employees in the world.

The country is ready to introduce major cryptocurrency regulations. Amid central bank concerns of vulnerabilities such as cyberattacks linked to rising use, a March 2022 debt deal with the International Monetary Fund (IMF) included a pledge to “discourage the use of cryptocurrencies with a view to preventing money laundering, informality, and disintermediation.”

Cryptocurrency in Cuba

Here the outsider. Yes it is, according to Nbc, it’s estimated that more than 100,000 of Cuba’s 11 million citizens use some form of cryptocurrency. That may not sound like a high number, but for a country that only recently introduced mobile internet, it’s a rapid growth. For Cuba, the uptick in crypto usage is related to the US embargo of Cuban economic activity, which, still today, blocks citizens’ access to much of the Western world’s financial systems.

Virtual currencies are especially popular in Cuba for remittance payments. In November 2020, when former President Donald Trump banned the use of Western Union, one of the main companies that was facilitating remittances to Cuba, the decision accelerated the use of sites like BitRemesas to send money to the island.

In April 2022, Cuba’s central bank approved licensing of certain cryptocurrency service providers, after having allowed crypto for personal use in 2021. Is known that given that cryptocurrency’s anonymity and independence from international oversight allows circumvention of US restrictions, Cubans, together with Venezuelans and Nicaraguans, have likewise enlisted cryptocurrency to get around sanctions.

Cryptocurrency in El Salvador

On September 7, 2021, El Salvador became the first country in the world to adopt Bitcoin as an official legal tender. President Nayib Bukele, enlisted his country as a pioneer and launched different initiatives such as a state-sponsored crypto wallet, volcano-powered crypto mines, and a utopic Bitcoin city. Bukele hoped citizens and businesses would adopt Bitcoin for everyday transactions and remittance payments. In the meanwhile, the IMF and ratings agencies warned against the adoption of Bitcoin due to the instability of its value and its vulnerability to financial crimes.

The reality of El Salvador’s Bitcoin rollout has been anything but utopia. May’s Bitcoin crash added to losses totaling $40 million, surpassing the $38 million El Salvador had to pay to bondholders in June. Crypto adoption by businesses and citizens runs low, and technical barriers to its usage abound.

After the fall down, Bukele attempted to stabilize the price of Bitcoin, buying over $105 million of the currency, Bloomberg reported. However Fitch downgraded El Salvador’s credit rating in October in part due to the Bitcoin move, and concerns exist of a potential default.