The crypto world can hold the key to Latin America's economic issues

Digital currencies and blockchain technology can benefit all Latin American countries

Latin American countries have many things in common. 

Mostly, our Latin culture bonds us with some similarities: the attachment and fidelity to our family, our ways to show emotion in a passionate way, and even our amazing culinary abilities and dishes. 

However, another trend seems to be connecting us: the adoption of cryptocurrencies. 

Of course, the massive crypto-mania all over the world would influence us in some kind of way as well. But, economic reasons seem to be one of the strongest motivators that push countries to massive adoption of the cryptocurrencies’ solution. 


The issue that bonds us all

Starting from the beginning, we all know that most of the Latin countries have struggled with economical issues since their birth. 

Exploitation and poor distribution of money led the majority of those countries to significant social gaps and less financial freedom. 

Therefore, of course, once a solution that implies the independence of the population’s money is urged, people would go directly into it. 

It took a great deal of time for that to happen, but it did. 

Cryptocurrencies are now a reality worldwide and they came with solutions that seemed specially made for those ‘exploited’ countries' problems.  

Yeah, we do know that wasn’t the only purpose of the birth of digital currencies, but it very well showed up as one. 

To resume, let’s make a simple deduction:

If someone tells you that they can give you money but you always have to work more and more throughout the years and you seem to be always behind those “givers” who always win the race, you’d be pissed, right?

Every time you work, you get the money, you get excited because now you’ll be able to buy what you always wanted. Then, you go to the grocery store just to find out that the thing you wished for is now three times more expensive than it was before. 

And it happens every time, as an eternal loop, and your money never gets to the point when it is valuable. You are always behind. You always “lose”.  

Now, imagine that someone comes up with a solution that you can make your money be as valuable as everyone else’s money - even as valuable as the money your “giver” makes.

In general and very superficial terms, that is what cryptocurrencies are able to provide for those countries that for generations have been always “behind” on the race. 

No wonder why Asian or African countries like Nigeria are also adopting cryptos massively - their profits can give you the chance, for the first time, to be in the race with the “big guys”. 

And that’s also the case of Latin America in general now. 

Numbers only grow and especially people from South American countries are feeling the “winners” sensation for the first time ever. 

Also, in addition to the inflation problem that affects the reserve of money with local currency, remittances with lower exchange fees are one of those benefits that is luring the South American populace in general.  

According to research made by the Latinamerican Economic Observatory (OBELA in Spanish):

“The economic crises that South Americans face even more now in the COVID era generate an incentive within their population to choose other reserve currency options to those commonly offered by the foreign exchange market. 

Remittances equally feed this market. A further motivation for using cryptocurrencies comes from not paying exchange commissions, so the recipient's cash income increases”.

Taking Bitcoin (the most valuable crypto in the market) as an example, OBELA also shows data coming from coin.dance, which states that for April 2021, the Latin American countries with the highest volume of cryptocurrencies are Colombia, with 45% of bitcoin volume in the region; followed by Peru with 13%; Chile with 12%; Mexico with 11%; and Brazil with 11%.


Venezuela

From the average perspective, from 2013 to April 2021, coin.dance and OBELA pointed out that Venezuela is the country with the most Bitcoin volume amongst other South American countries. 

The cheap cost of power in Venezuela is becoming an incentive for mining companies to establish in the country. 

Some investors are aiming at this opportunity since Venezuela is one of the countries that are starting to see the benefits of this new digital world, from Bitcoin to play-to-earn games such as Axie Infinity.


Colombia

According to OBELA’s report, Colombia is the country with the second-highest volume of bitcoins and the largest network of cryptocurrency ATMs. 

The Observatory states that the country currently has 60 Coin ATM Radar, which allows the direct exchange of a currency, be it physical or from a bank account or any cryptocurrency. 

However, OBELA highlights that “given that it is a country with solid illegal activity, it lends itself to the use of these. The anonymity of the bitcoin system has a problem given that entering the system erases any trace of origin, and no user data can be obtained, except for the exchange made within the network”. 


Mexico

Mexico has a positive side in this crypto growth political-wise. The country has been a pioneer in regulating the use of cryptocurrencies and the operations of digital currency exchange houses, with its 2018 Fintech Law. 

The negative point emphasized by the Latinamerican Economic Observatory is that Mexico is one of the Latin American countries with the lowest volume of operations and exchange houses. 

However, it makes up with “the most regulated and controlled cryptocurrency market, having less risk of illicit applications than other countries in the region”. 


Peru 

After the presidential election that led to Pedro Castillo’s victory, numbers of cryptocurrency adoption in Peru grew exponentially. 

The current Peruvian President is known for his interventionist policy in economic policy and has talked before about nationalizing activities in the country such as mining operations, oil industries, and telecommunications. 

This led up to a growth of 24.14% in the weeks of the presidential ballot, compared to the week before it, and it kept growing the week after the elections, increasing by 24.36%. 

Almost, in the same way, bitcoin trade volumes also increased by 25.10% to 23.05% respectively in those weeks.

Now, Peru is also joining the global push to develop a central bank digital currency (CBDC), central bank President Julio Velarde said on Tuesday, as policymakers worldwide seek to keep pace with fast-spreading cryptocurrencies”.


Argentina

Argentina has been facing an economic crisis for a while now. 

According to The New York Times, “its economy shrank nearly 10 percent in 2020, the third straight year of recession”. 

So, like it’s been said earlier in this article, it’s logical that the country’s population would find a way to surpass this with an alternative option. 

An article published in Forbes by a Former Forbes staffer, now Digital Director for Perfil in Argentina, Agustino Fontevecchia, states that “a new report indicated that Argentina ranked 21st in the world in realized bitcoin gains last year, with some US$200 million”. And with the dirt-cheap residential electricity costs, the boom in crypto-mining was fed. 

Fontevecchia also added:

“There’s a lot going on in the crypto world in Argentina, and until now, it has managed to fly below the radar to a certain extent. 

Not only are Bitcoin and the rest of crypto assets interesting from a standpoint of financial speculation, but they’ve also created a massive hype that has brought along with it creativity and innovation. 

Argentina has, once again, a very real opportunity to be at the forefront. Hopefully, the political class doesn’t notice any time soon”. 

-Agustino Fontevecchia, Forbes 


Chile

Ever since El Salvador’s adoption of Bitcoin as legal tender, other countries started to have eyes on the same idea to solve many issues such as inflation and remittances fees. 

That was the case for Chile, which according to the latest Blockchain Latin America 2021, had 36% of its population believing that cryptocurrencies should be adopted as official currency. 

Even though those numbers are behind other Latin countries, the pressure for change is already coming. 

A report made by Fortin Mapocho said that two Chilean deputies have presented a resolution on blockchain adoption to the lower house of the country’s parliament (Camara de Diputados) on October 4, 2021. 

In the resolution project, the two members of parliament (MPs) Miguel Angel Calisto and Giorgio Jackson, appeal to Sebastian Pinera, Chile’s President, to implement blockchain in all public areas of the country. The document was signed by eight other members of the parliament as well. 

The project also incentives studies on the advantages of blockchain-based security and energy solutions.


Brazil

The situation in Brazil is very similar to its neighboring countries. 

Even though it does not have a regulation in cryptocurrency yet, the country has an exponential ascendence in crypto adoption as means to a better form of currency reserve, as well as to dribble inflation. 

In a survey provided by the Brazilian Association of Financial Markets and Capital Entities (in Portuguese, ANBIMA), even though it had a mild low in 2020, the number of investors in financial products has been increasing slowly but surely. 

While in 2018, 42% of Brazilians were investing in this sector, in 2019 it went up to 44%.

In 2020, there was a decrease (40%) but the research considered the Coronavirus pandemics one of the main reasons the country did not perform so well and the expectation is that the numbers continue to climb their way up once things get more settled. 

In addition to that, according to research made by the Economic School of Sao Paulo, Fundação Getulio Vargas (FGV), in partnership with the Brazilian crypto fund company, Hashdex, cryptocurrencies already is the third most favorite form of investment to Brazilians who invest in platforms.

The government also wants to develop its own digital currency (CBDC) in the next three years.  


Dominican Republic

Closing the list of the most crypto-adoption promising countries in South America (or in Latin countries), the Dominican Republic is also showing its potentials and beliefs in cryptocurrencies. 

Even with the government's strong positioning in not supporting the digital currencies, the Caribbean country seems to be in the way of doing it without it anyway. 

 As the largest free economy in the Caribbean, the country deals with a lot of economic situations that one could say fit exactly with what cryptocurrencies purpose to solve. 

One, for instance, is the remittances issue. The Dominican Republic receives a lot of remittances from abroad (circa 8% of its GDP).

And however it helps with the country’s situation, we can also add this up to the pile of solutions that cryptocurrencies carry with them. 


They have the lock and cryptos are the key

To sum up, South America and Latin countries are amongst the countries with the most potential to develop great digital currencies’ success. 

They have the lock and cryptos are the key. 

It seems that it’s up to the populace's pressure and governments’ willingness to grow powerful crypto-based economies, in the example of El Salvador’s initiative. 

Nevertheless, we cannot forget that this implies education and awareness of what the crypto universe can do for economies in general. 

How to know something is a solution if it was never presented as one for you? 

That’s the point we have to be sure is not uncovered anymore. 

People have to know what those technologies can do for them. That’s the only way we can finally achieve global financial freedom. 

Maluh Bastos
Klever Writer
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