How the crypto wave is impacting Latin America’s financial ecosystem

The growing adoption of cryptocurrencies in Latin America reflects a booming trend in various countries in the region, driven by economic factors and specific needs of each nation. That is why EFE, the news agency, conducted a analysis of the diverse and dynamic panorama of the cryptocurrency situation in Argentina, Mexico, Venezuela, El Salvador, Brazil, Bolivia and Colombia, which reflects how cryptocurrencies are shaping new economic dynamics in Latin America, with each country facing its own challenges and opportunities on the path to greater adoption of cryptoassets.

Read: The Bitcoin market has overcome the crisis that caused the bankruptcy of FTX

The constant devaluation of the Argentine peso and exorbitant inflation have led Argentines to increasingly adopt cryptocurrencies as an investment alternative and protection of their purchasing power. According to the Global Crypto Adoption Index 2023, prepared by Chainalysis, Argentina is ranked 15th in the world, only surpassed in Latin America by Brazil.

“Argentina has an impressive level of cryptocurrency adoption, out of necessity, because it has lived in the last 20 to 30 years with many economic problems,” Pablo Casadio, co-founder and financial director of Bit2Me, told EFE. This scenario has turned the country into a magnet for large international players and has fostered local innovations such as Agrotoken, backed by grains, and Atómico 3, anchored to lithium.

“Argentines are very innovative and for us the Argentine ‘crypto’ ecosystem is impressive,” Casadio adds. According to Mariano Biocca, executive director of the Argentine Fintech Chamber“There are nearly ten million virtual asset trading accounts in Argentina,” making the country a regional leader in volume of assets transacted.
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In Mexico, cryptocurrency adoption continues to rise, with Bitcoin dominating the domestic market with a 99.5% share. Bitso, the main Mexican exchange, has a 40.7% share of the Latin American market. “Although no bank accepts cryptocurrency payments and only a few businesses have implemented it, one of its main uses is sending remittances to Mexico from the United States,” highlights Kaiko, a market research firm.

In 2021, the Bank of Mexico (Banxico) announced the launch of its own digital currency, now scheduled for 2025. “Banxico plans to launch its own central bank digital currency; although the current governor Victoria Rodríguez Ceja said that it will not be until 2025 when it operates in the country,” a report says.

In Venezuela, cryptocurrencies are primarily used as a store of value in the face of constant inflation and devaluation of the bolivar. “Venezuelans do not use them at a transactional level, but rather as a savings reserve,” Aarón Olmos, an economist and cryptocurrency specialist, explains to EFE. This strategy allows citizens to protect their money from the “onslaught of the economic situation,” Add.

The sector faces significant constraints due to the restructuring of the Superintendency of Cryptoassets and Related Activities (Sunacrip) following a corruption scandal. “All companies licensed to operate remain intervened and suspended,” Olmos comments. According to the Global Cryptocurrency Adoption Index 2023, Venezuela ranks 40th worldwide.

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El Salvador captured global attention in 2021 by adopting Bitcoin as legal tender, a move promoted by President Nayib Bukele to boost financial inclusion and attract foreign investment. However, three years later, the majority of the population still does not use the cryptocurrency in their daily lives. “88% of Salvadorans did not use the Bitcoin cryptocurrency in 2023,” according to a survey by the University Institute of Public Opinion (Iudop).

Almost three years later, after analyzing and observing the behavior of the population, we can say that this government experiment has failed.”economist Tatiana Marroquín told EFE. The financial inclusion that was expected has not materialized due to the “ignorance of the subject,” adds this expert.

Mercado Bitcoin, one of the main cryptocurrency platforms in Latin America, has managed to overcome the crisis caused by the bankruptcy of the giant FTX. “Since the beginning of 2024 we have been seeing growth that makes the business viable,” Reinaldo Rabelo, CEO of Mercado Bitcoin in Brazil, says. The platform has 3.8 million users in the South American giant and plans to launch new financial products, including fixed-income plans and a bank card in collaboration with Mastercard.

“We’re taking that complex part out of Bitcoin (…), the usage has to be good enough for people to forget about the technology,” Rabelo stresses. Recent regulation in Brazil improves investor confidence, although this executive warns that “an excessive dose can kill the patient,” If the same are imposed requirements for a cryptocurrency platform than for a traditional bank.

Bolivia recently lifted its ban on buying, selling and investing in cryptocurrencies, opening up new opportunities for its citizens. “Regulation is very important; it should not prevent, it should not create obstacles, but rather it should help,” Jaime Dunn, a financial analyst, told EFE. Currently, there are 250,000 Bolivian citizens with crypto accounts.

The Central Bank of Bolivia (BCB) has launched an Economic and Financial Education Plan to promote informed use of crypto assets. “The technology that supports cryptocurrencies, called ‘blockchain’, is a decentralized database that is located on more than one server,” details an explanatory note from the BCB.

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Colombia ranks 32nd in the Global Crypto Adoption Index 2023. The Bank of the Republic and the Financial Superintendence of Colombia are working on pilot projects for technological and financial innovations. “Cryptocurrencies are not explicitly regulated or recognized as official currency,” clarifies the Bank of the Republic.

Read: What is the status of cryptocurrency regulation in Colombia?

The Financial Superintendence launched the LaArenera platform for the implementation of technological and financial innovations. “After the pilot was completed, no incidents were observed that put the continuity of the exchange pilot at risk,” says the Superintendence. However, they warn that “cryptoassets are not backed by a central bank or by the assets or reserves of said authority.”

EFE