Worldwide, Latin America is the seventh largest cryptocurrency market. Between 2021 and 2022, it received an estimated $560 billion in digital money, a 40% raise compared to the previous year. Five of the world’s top thirty countries in the crypto index are located within Latin America, namely Argentina, Ecuador, Mexico, Brazil and Colombia.
However, in light of the market changes of 2022, many believe the future of cryptocurrencies in the region remains uncertain. Even Bitcoin, the key cryptocurrency serving as the blueprint for all those that followed it, recorded massive losses throughout the year, shedding around 70% of its previous value. Nonetheless, 2023 has brought renewed hope, and the Bitcoin price has continued to rise ever since, surpassing the $30k barrier.
With that in mind, let’s examine some of the countries that are most likely to move closer towards crypto, how they are likely to do so, as well as the trends driving increased cryptocurrency adoption in Latin America.
Establishing cryptocurrency as legal tender remains controversial, at least for the moment, owing to results recorded by El Salvador. The country adopted crypto as fiat currency in 2021, with mixed results. The International Monetary Fund has claimed that while the predicted risks haven’t fully materialized, they should nonetheless be addressed. Fiscal fragility and potential legal risks are among the most significant issues that authorities warn could become problematic when countries are exposed to digital assets on a large scale.
However, with regulations apparently on their way, it might soon be the case that cryptocurrencies will become an overall safer asset class and will be safely integrated into traditional fiscal systems. Costa Rica is one of the countries that could potentially establish a regulated framework for the development of cryptocurrencies, in which users based within the country could perform payments using digital money.
In the last months of 2022, the Legislative Assembly of Costa Rica proposed a bill to make Bitcoin a regular form of payment. Banks and other financial institutions would also be able to serve the function of crypto exchanges by providing their clients with digital wallets and crypto-based services. The bill’s aim is also to establish the country as an investment center for digital assets, as well as the institutional investors that use them.
While crypto isn’t prohibited within Argentina, the government has put forward regulations on trading digital assets and tokens. The legislation serves to protect against potentially illicit activities, such as money laundering and tax evasion. However, as of the last few years, the general public has become increasingly interested in cryptocurrencies and started using them.
There are many causes for this, although analysts consider that distrust related to the economy plays a large part. During the 1980s, in the days of the Latin American debt crisis, Argentina was severely affected, with inflation rates skyrocketing. During that time, the region quadrupled its external debt, going over $315 billion in 1983, or 50% of Latin America’s GDP.
Ever since, most high-level purchases have been paid in US dollars, and the capital controls mean that accumulating savings can be challenging. Cryptocurrencies and stablecoins may be an accessible solution, as they provide financial safety and are also censorship-resistant, meaning they’re not subjected to any central fiscal authority.
This trend has become particularly common during the pandemic, when many Argentinians chose Bitcoin to protect their money, convinced by the fundamental characteristic of BTC: its limited supply, which creates scarcity and contributes to a higher value.
According to research, cryptocurrency adoption in Mexico is particularly popular among citizens receiving remittance payments from family members living abroad. There’s around $52 billion entering the country in this manner, and cryptocurrencies are used for an increasing percentage of this type of transaction.
As of June 2022, a local exchange had already processed over $1 billion in incoming remittances arriving from the United States. Those figures represent a year-over-year growth rate of approximately 40% and nearly 5% of the remittance market in Mexico.
Some exchanges have become staunch competitors for banks and other traditional institutions. As of last year, approximately 40,000 establishments within Mexico, including department and convenience stores as well as supermarkets, had established cryptocurrency cash-out services.
In the case of Brazilian customers, the main reason for adoption is to expand personal earnings and wealth. Interest rates have been significantly lower within the country, with stronger price appreciation believed to be one of the catalysts for higher interest in crypto. Yet, adoption rates remained relatively steady even during the crypto winter and bear markets.
Within the retail sector, the number of investors has been growing at a much faster rate compared to those dealing in equities. Institutions, as well as individual investors with a considerable amount of capital at their disposal, have also become more and more involved. However, democratizing access has led to traders of average income joining the ranks too.
Brazil has a transaction volume that occurs mainly in retail augmentation compared to other nations within Latin America. Both small and large retail represents a much more significant proportion of the total trading volume than the rest of the country.
According to World Bank estimates, Venezuela ranks relatively high in cryptocurrency adoption. Between December 2014 and September 2022, the national currency, the Venezuelan bolívar, depreciated by over 100,000%. However, despite this staggering devaluation, Venezuela remains a growing market for the US dollar and cryptocurrencies. In 2022, the country received nearly $40 billion in crypto, 32% more than in 2021.
The country is also a popular hub for play-to-earn blockchain games, and some have yielded returns that could even overcome the nation’s minimum wage. Venezuela has the second largest number of players in the world, being preceded only by the Philippines and is followed by Brazil, according to official data from the player base community.
The future of cryptocurrencies in Latin America appears to endure, and investors can expect that it will continue to grow over the following years. If the market remains stable and the crypto maintains roughly the same values, traders can be confident that fate has smiled upon digital assets and tokens.