Cointelegraph en Español had access to a report that remarks that Latin America has the sixth largest economy in cryptocurrencies of the eight regions they studied, with $ 352.8 billion in cryptocurrency value received between June 2021 and July 2020. Based on that figure, Latin America accounts for roughly 9% of all transaction activity.
However, despite being among the smallest markets, Latin America shows strong grassroots adoption.
Three Latin American countries are in the top 20 of the Global Crypto Adoption Index: Venezuela at number seven, Argentina at number ten and Brazil at number 14.
However, as explained in the report, the use cases and maturity of these markets vary enormously, leading to differences in the types of platforms and currencies they use the most.
What drives cryptocurrency activity in Latin America?
Latin America has a P2P activity above the average, a dynamic that can be seen in many emerging markets. However, the level of dependence on P2P platforms varies greatly depending on the country in the region.
Venezuela, for example, ranks seventh on the Global Cryptocurrency Adoption Index in large part due to P2P activity. – The data shows that the country ranks sixth in the volume of P2P transactions when adjusted to the purchasing power of the country and the number of Internet users. But this is not the case for all countries in the region. While Venezuela leads P2P activity with a value of $ 629 million in cryptocurrencies, other markets in the region have much less P2P activity despite having larger markets overall.
Brazil, for example, has a much larger cryptocurrency market than Venezuela, with $ 90.9 billion received in the last year compared to $ 28.3 billion in Venezuela. However, Brazil has received only $ 90 million in P2P transactions. This also places Brazil behind Colombia, Argentina, Peru and Chile in P2P activity, despite the fact that Brazil has a larger global market than all of them.
Venezuela and Argentina: Cryptocurrency Adoption Driven by Need
Valiu is a US-based cryptocurrency wallet provider whose goal is to enable Latin Americans to transact and save money with stablecoins, starting with Venezuela. From Valiu, the Product Manager, Tomás Fox, provided details to learn more about the adoption of cryptocurrency in Venezuela.
“A lot of Latin American countries have economic instability, so people there are not really interested in trading cryptocurrencies or getting exposed to Bitcoin because it’s going to hit $ 80,000,” Fox said.
“People are trying to survive, so they need the ability to switch between their local currency and the cryptocurrency to preserve its value,” he added.
On the other hand, as the Argentine peso steadily loses value during the period studied, P2P commercial activity tends to increase, although the relationship seems to decrease around August 2020.
These analyzes also do not take into account the capital control measures that governments can use to combat currency devaluation. Depending on the severity of those controls, they can reduce the need for cryptocurrencies or push more people to adopt them.
Furthermore, the volatility of crypto assets can influence people’s decision to adopt them or not in the face of fiat currency devaluation. But even with these caveats, we see a remarkable but declining relationship between currency devaluation and the use of P2P cryptocurrencies in Latin America.
Remittances are another force driving cryptocurrency adoption in Latin America.
This is not entirely surprising, as traditional fiat currency remittances are very important to many Latin American countries.
According to the World Bank, incoming remittances in 2020 represented 2.4% of GDP for Latin America as a whole, more than any other region in the organization besides South Asia. In countries like El Salvador and Honduras, remittances represent more than
20% of the national GDP. Although the World Bank does not have recent estimates of remittances as a percentage of Venezuela’s GDP, experts say that these payments are crucial for that country as well.
Chainalysis data shows that cryptocurrency-based remittance payments to Venezuela have risen steadily over the last year.
The above graph shows the monthly growth of payments in cryptocurrency below a thousand dollars, both in volume and in number of transfers, which is considered the upper limit of the estimated remittance payments of remittances sent to Latin American countries.
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