According to a report by Chainanalysis, Latin America stands out in the cryptocurrency economy with several use cases

Cointelegraph in Spain had access to a report that found that Latin America has the sixth largest cryptocurrency economy of the eight regions studied, with a value of $ 352.8 billion in cryptocurrencies received between June 2021 and July 2020. Based on this number Latin America represents approximately 9% of all transaction activity.


According to a report by Chainanalysis, Latin America stands out in the cryptocurrency economy with several use cases
According to a report by Chainanalysis, Latin America stands out in the cryptocurrency economy with several use cases

Although Latin America is one of the smallest markets, it shows strong grassroots acceptance.

Three Latin American countries are in the top 20 in the Global Crypto Adoption Index: Venezuela in seventh place, Argentina in 10th place and Brazil in 14th place

However, as explained in the report, the use cases and maturity of these markets vary enormously, resulting in differences in the types of platforms and currencies that use them most frequently.


What is driving cryptocurrency activity in Latin America?

Latin America has above-average P2P activity, a dynamic that can be observed in many emerging markets. However, the degree of dependence on P2P platforms varies greatly depending on the country in the region.

Venezuela, for example, ranks seventh in the Global Cryptocurrency Adoption Index, largely due to P2P activity. – The data shows that the country ranks sixth in terms of the volume of P2P transactions, adjusted for the country’s purchasing power and the number of internet users. However, this does not apply to all countries in the region. While Venezuela leads P2P activity valued at $ 629 million in cryptocurrencies, other markets in the region have much less P2P activity despite larger markets overall.

Brazil, for example, has a much larger cryptocurrency market than Venezuela, with $ 90.9 billion last year compared to $ 28.3 billion in Venezuela. However, Brazil has only received $ 90 million in P2P transactions. This puts Brazil behind Colombia, Argentina, Peru and Chile in P2P activities, even though Brazil has a larger global market than any other.

Venezuela and Argentina: Demand-driven introduction of cryptocurrencies

Valiu is a US-based cryptocurrency wallet provider whose goal is to enable Latin Americans to trade stablecoins and save money, starting with Venezuela. At Valiu, product manager Tomès Fox provided details to learn more about the introduction of the cryptocurrency in Venezuela.

“A lot of countries in Latin America have economic instability so people there aren’t really interested in trading cryptocurrencies or dealing with Bitcoin because it will 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 maintain their value,” he added.

However, with the Argentine peso steadily depreciating in value over the period under review, commercial P2P activity is tending to increase, although the ratio appears to be decreasing around August 2020.

Nor do these analyzes take into account the capital controls that governments can take to counter currency devaluation. Depending on the severity of these controls, they can reduce the need for cryptocurrencies or get more people to adopt them.

In addition, the volatility of crypto assets can influence people’s decision whether or not to adopt them in the face of the devaluation of the fiat currency. But even with those caveats, we see a remarkable but declining link between currency devaluation and the use of P2P cryptocurrencies in Latin America.

Remittances are another force driving the adoption of cryptocurrencies in Latin America.

This is not entirely surprising as traditional transfers in fiat currency are very important to many Latin American countries.

According to the World Bank, inbound remittances represented 2.4% of Latin America’s total GDP in 2020, more than any other region in the organization except South Asia. In countries like El Salvador and Honduras, transfers make more than

20% of the national GDP. Although the World Bank doesn’t have up-to-date estimates of remittances as a percentage of Venezuela’s GDP, experts say these payments are vital for that country as well.

Chainalysis data shows that cryptocurrency-based transfers to Venezuela have grown steadily over the past year.

The graph above shows the monthly growth in cryptocurrency payments below a thousand dollars, both in volume and in the number of transfers, which is considered the upper limit of the estimated transfer payments from transfers to Latin American countries.

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