The Rise of Latin America as a Key Player in the Crypto Industry
Latin America, a region plagued by fractures, is now turning its gaze towards cryptocurrencies. What exactly is unfolding in these nations?
Table of Contents
Overview
A glance at the leading countries embracing cryptocurrencies
Final Thoughts
Overview
Research conducted by Chainalysis reveals that Latin America holds the seventh position in the global crypto economy, representing 7.3% of the market. Residents in the region often turn to digital assets as a means of safeguarding their wealth against currency devaluation and as a tool to combat authoritarianism.
Experts predict a shift towards the widespread adoption of blockchain and cryptocurrencies in everyday life by the end of 2023, with Latin America playing a pivotal role in this transformation. Between mid-2022 and 2023, 51% of residents in the region made purchases using various digital currencies.
Source:
Chainalysis
Circle
credits
this trend to the region’s robust developer community. Approximately a million individuals in Latin America are actively engaged in offshore development, significantly influencing the local market and enhancing the value and accessibility of the financial sector.
However, several factors have contributed to the proliferation or rejection of cryptocurrencies in Latin America.
A Glance at the Leading Countries Embracing Cryptocurrencies
Significant disparities exist in the utilization of digital assets across different jurisdictions in the region.
El Salvador
El Salvador
made history by becoming the first country to officially recognize Bitcoin (
BTC
) as legal tender. As part of his pro-crypto agenda, President Nayib Bukele has pledged to purchase one BTC every day.
The Latin American nation has amassed over $300 million in Bitcoin over two years. Bukele has no intentions of selling the Bitcoins, citing that BTC can stimulate tourism, innovation, and economic growth.
Moreover, El Salvador has rolled out various cryptocurrency initiatives, including offering citizenship through cryptocurrency investments and utilizing volcanic energy for BTC mining.
Argentina
Javier Milei, a vocal advocate for cryptocurrencies, assumed the presidency of Argentina last year. He vowed to drastically reduce the public sector, curb triple-digit inflation, eliminate the Central Bank, and replace the peso with the U.S. dollar.
Considered a staunch critic of central banks, Milei supports Bitcoin, highlighting its limited supply as a key advantage. Following Milei’s electoral victory, the exchange rate of Bitcoin against the Argentine peso reached a record high.
Subsequently, Argentina has witnessed a surge in cryptocurrency adoption. The country is actively progressing in regulating the digital asset industry. In January, the Argentine government, led by the President, opted against imposing a new tax on previously undisclosed cryptocurrencies.
Furthermore, Argentine regulators are in talks with their counterparts in El Salvador regarding the regulation of Bitcoin and other digital assets. Both countries are working towards establishing a financial alliance in which Bitcoin will play a central role.
Paraguay
In October 2023, Bitcoin miner Sazmining inaugurated the first entirely renewable energy-powered mining farm in Paraguay. The miner selected Paraguay due to its abundant energy resources and low tariffs.
Since then, Paraguay has been reevaluating its stance towards Bitcoin miners, offering them more favorable working conditions. This decision followed the introduction of a bill to temporarily ban mining in early April.
This strategy aims to attract additional funding for infrastructure projects without burdening the population with increased energy costs. Paraguay is easing its regulations on cryptocurrency miners, potentially fostering growth in the country’s mining sector.
Brazil
Kaiko reports a 30% increase in digital currency trading volume in Brazil in 2024. From January to April, cryptocurrency transactions surpassed $6 billion. Brazil ranks seventh globally in terms of cryptocurrency transactions paired with fiat currency.
Amidst rising interest in cryptocurrencies among its citizens, the Central Bank of Brazil is actively formulating regulations for digital assets, expected to be in effect by the end of 2024.
The country plans to roll out a gradual program for regulating digital asset transactions. Initially, the Central Bank will focus on registering crypto companies, requiring them to obtain licenses and be listed in a unique database of virtual service providers (
VASP
).
The subsequent stage will involve heightened scrutiny of transactions involving virtual currencies, with a particular emphasis on monitoring stablecoins.
Mexico
Mexico became the first Latin American nation to initiate the regulation of crypto exchanges and other platforms facilitating transactions with cryptocurrencies back in 2018.
Chainalysis experts note that Mexico now ranks second globally in terms of cross-border crypto transactions, with approximately $61 billion worth of assets transferred annually, primarily from the United States.
Updates on the legal framework governing cryptocurrencies in Mexico are imperative. However, the country’s authorities are actively working on introducing a digital peso.
The regulator aims to incorporate features such as automation and programmability into the asset. The Bank of Mexico advanced the timeline for the launch of the digital peso from 2024 to 2025 in 2023.
Final Thoughts
Sebastian Serrano, CEO of Ripio, acknowledges that Latin America is emerging as a hub for the global cryptocurrency market. Retail investors exhibit significant interest in tokens, and companies are gradually transitioning to this instrument, enabling the unrestricted movement of capital worldwide.
Consequently, the utilization of cryptocurrencies in Latin America is poised to surge in the coming years. Brazilian importers are already using virtual currencies to settle payments with Chinese suppliers.
