How cryptocurrency adoption is winning over the Latin American countries this year?
Latin American countries have turned to Bitcoin and blockchain, cut out of the global economic system and with nowhere to go, to fill the gaps in their economies. El Salvador went even further by legalizing bitcoin as legal tender instead of the US dollar. Many criticized this decision as controversial, yet, after more than six months, the country is doing well.
And it’s not just El Salvador. Cryptocurrency adoption in Latin America will grow over the 2022. From 2019 to 2021, the overall adoption of cryptocurrencies has grown by a whopping 1370%. In times of uncertainty, young people are turning to the cryptocurrency market, which is almost widespread in Latin America.
After the surge of Omicron’s COVID-19 variant, 2022 business activity is finally moving forward. Latin America has faced major challenges caused by the pandemic, but it has also seen opportunities. According to the Economic Commission for the Americas and the Caribbean (ECLAC), the region will experience very modest growth compared to last year, estimated at 2.1%, in line with global economic forecasts. However, the region currently has a window of opportunity, the business world taking a fresh look at the booming crypto economy.
Brazil, the largest economy in Latin America, is estimated to show the least growth at just 0.5%. Mexico is expected to grow by 2.9%, Colombia by 3.7% and Chile by 1.9%. According to an ECLAC study, the recovery of the countries of the region will depend primarily on domestic demand. There has been a recovery in 2021 driven by an increase in consumption driven by cash support that governments have put in place to deal with the COVID-19 emergency. While remittances rose by 30%, which further contributed to this.
In 2021, 11 countries in Latin America and the Caribbean managed to restore their GDP performance to pre-crisis levels. Three more will be added in 2022, bringing the total to 14 of the 33 countries in the region.
Yet there is another chapter in this story, a chapter that began in 2021 with the approval of cryptocurrency as legal tender in El Salvador. This unprecedented measure, which made El Salvador the first country to adopt Bitcoin as a national currency, sparked a storm of discussion in Latin America and opened up new opportunities.
With over 455 million current Internet users and higher growth projections than any other part of the world, Latin Americans are looking to modern technology solutions for financial inclusion and digitization as a service. This opens up a huge market of opportunities for regional and global companies that want to develop and exploit these opportunities before anyone else.
For millions of Hispanics, cryptocurrency is a quick way to receive resources sent by relatives working abroad. According to the latest data published by Chainanalysis, four countries in the region — Venezuela, Argentina, Colombia, and Brazil — are in the top 20 largest cryptocurrency operations.
There is a logical explanation for this. According to the World Bank, the official remittance market in Latin America is worth about $96 billion. Traditional money transfer services have historically come with high fees, unfavorable exchange rates, limited operating hours, long transfer times, and daily amount limits. However, with the newfound availability of cryptocurrency money transfers, a new opportunity has emerged as the system uses a different exchange rate as a reference and does not have any fees or limits on transfers. Given the increase in the speed and efficiency of money transfers, sending money transfers through cryptocurrency channels has become a more viable option.
It is important to consider that the adoption barriers for cryptocurrencies in many Latin American countries are often lower than the traditional practices within financial management. Let us take into account the following data: approximately half of the Latin American population does not have access to basic banking services. As for credit cards, only 113 million out of 650 million have access to them. The World Bank reports that 55% of adults in the region have a mobile phone and internet access. This is 15 percentage points higher than the developing country average. From this, we gain a clear understanding of why an unbanked population with access to Wi-Fi chooses cryptocurrency over a checking account.
Even though these were tough times for cryptocurrencies, in the Latin America region, the use of cryptocurrencies has grown by 1370% from 2019 to 2021. But there is another chapter in this story, a chapter that began in 2021 with the approval of cryptocurrency as legal tender in El Salvador. Last year, El Salvador was the first in the world to approve a cryptocurrency — in this case Bitcoin — as an official means of payment.
However, fun fact, the country has lost almost $40 million with crypto since its adoption in September 2021, but the fiasco has not stopped the growth of crypto: in 2021, the value of crypto companies in Latin America has grown tenfold from $68 million to $650 million. dollars.
Countries in the region are currently considering enacting legislation to promote and protect the use of these products. Brazil and Argentina apply income tax to all cryptocurrencies, while Venezuela and Chile have approved the use of cryptocurrencies, but this is unacceptable for everyday trading and retail transactions.
As of April 2022, Brazil is valued at $27.6 billion annually and is the largest crypto market in the region. This volume makes Brazil a hub for crypto-related venture capital. For example, the first cryptocurrency unicorn in Latin America, Mercado Bitcoin, is Brazilian, moreover, according to the Global Status of Cryptocurrency Report 2022, Brazil has the highest percentage of crypto-owning population in Latin America.
The government is in the process of developing a regulatory framework. On April 26, the Brazilian Senate passed a bill regulating virtual assets, including bitcoins and tokens. The bill includes provisions that define virtual assets and create rules for everyday use. Suppliers must follow best practices to protect customer funds and personal information. It also sets penalties for fraud, which was $503 million in 2021.
Much of the attraction of bitcoin in Argentina has been driven by the volatility of the peso, which has an annual inflation rate of over 55%. Once upon a time, Argentines sought to keep their assets in dollars or euros, but the flow of cryptocurrencies in Argentina reached $103 billion in 2021. According to Bloomberg, the number of companies partially paying their employees in crypto has increased by 340% over the past year, making it the highest percentage of crypto-paid employees in the world.
The country is ready to introduce the basic rules of cryptocurrency. Amid central bank concerns about vulnerabilities such as cyberattacks associated with rising usage, a debt deal with the International Monetary Fund (IMF) in March 2022 included a commitment to “prevent the use of cryptocurrencies to prevent money laundering, informal activities and cutting out intermediaries”.
The Quppy neobank entering the Latin American market marks an important step in the Quppy ecosystem development as it secures cross-border payments and strengthens financial flows between Europe and Latin America reuniting families, connecting friends, opening opportunities to local specialists.
Despite the fact, that there is a significant number of national crypto and fintech projects, Quppy opens a lot of benefit to its regional customers especially by offering digital IBAN opening in euros, British pounds and US dollars and a service of this IBAN instant top up via the local bank account in a local currency.
