How Latin America became an important player in the crypto landscape?

Fragmented Latin America is turning its attention to cryptocurrencies. What is happening in these countries?

Review

According to Chainalytics research, Latin America is the seventh largest crypto economy in the world, accounting for 7.3% of the market. Residents often use digital assets as a store of value and a weapon against authoritarianism during devaluations of national currencies.

Experts also state that a shift towards mass adoption of blockchain and cryptocurrencies into daily life is on the way by the end of 2023, and Latin America plays a leading role in this. From mid-2022 to 2023, 51% of residents purchased things with digital currencies.

Source: Chainaliz

Circle attributes this dynamic to its strong developer base. Nearly one million people in the region are actively involved in offshore development. These developers significantly impact the local market, increasing the value and accessibility of the Latin American financial sector.

“Taken together, Latin America’s well-established market demand, policy support and widespread use of the dollar make the region a natural fit for broader stablecoin adoption.”

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However, several other reasons have also contributed to the active promotion or abandonment of cryptocurrencies in Latin America.

The most prominent countries in the implementation of cryptocurrencies: an overview

There are significant differences in digital asset usage patterns across jurisdictions in the region.

El Salvador

El Salvador is the first country in the world to recognize Bitcoin (BTC) as legal tender. The country’s current President, Nayib Bukele, has promised to purchase one BTC a day as part of his policy to support cryptocurrencies.

Now the Latin American state has accumulated more than $300 million in Bitcoin in two years. Bukele does not appear to be planning to sell Bitcoin; He insists that BTC allows developing tourism, innovation and the economy.

Additionally, El Salvador has launched several cryptocurrency initiatives. These include obtaining citizenship by investing in cryptocurrencies and mining BTC using volcanic energy.

Argentina

Last year, cryptocurrency supporter Javier Milei became President of Argentina. He promised to significantly reduce the public sector of the economy and government spending, combat triple-digit inflation, eliminate the Federal Reserve, and replace the peso with the US dollar.

He is seen as an outspoken opponent of central banks and supports Bitcoin, believing that digital gold’s key advantage is its limited supply. Following Milei’s victory in the presidential election, Bitcoin’s exchange rate against the Argentine peso approached a historical high.

“They are defrauding you with inflation tax through legal tender… #Bitcoin the natural response to central bank fraudsters; “To make money special again.” – Javier Milei, President of Argentina 🇦🇷🇦🇷pic.twitter.com/Rs2yXFo4e7

— Dylan LeClair 🟠 (@DylanLeClair_) 19 November 2023

Since then, the country has seen an active increase in cryptocurrency loyalty. Currently, the country’s regulations regarding the digital asset industry are actively advancing. So, in January, the Argentine Government, headed by the President, decided not to introduce a new tax on previously undeclared cryptocurrencies.

Additionally, Argentine regulators are discussing the regulation of Bitcoin and other digital assets with El Salvador authorities. The countries plan to create a financial alliance in which Bitcoin will play a key role.

Representatives of the Argentine regulator praised the authorities of El Salvador for creating favorable conditions for using the first cryptocurrency and developing legislation that allows the growth of cryptocurrency startups in the country.

Paraguay

In October 2023, Bitcoin miner Sazmining launched the first farm in Paraguay powered entirely by renewable energy. The miner chose Paraguay due to its vast energy potential and low tariffs.

Since then, Paraguay has been actively revising its policy towards Bitcoin miners, offering them more comfortable working conditions. This decision was taken after consideration of the bill banning mining, which was provisionally submitted at the beginning of April.

This strategy will allow the state to attract additional funds to finance infrastructure projects without increasing energy tariffs for the population. Thus, Paraguay is softening its policy towards cryptocurrency miners who can contribute to the development of the country’s mining industry.

Brazil

According to Kaiko, digital currency transaction volume in Brazil will increase by 30% in 2024. In the January-April period, the transaction volume with cryptocurrencies exceeded 6 billion dollars. Brazil ranks seventh among the world’s countries in terms of transaction volume with cryptocurrencies paired with fiat currency.

Source: Kaiko

In the face of citizens’ widespread interest in cryptocurrencies, the Central Bank of Brazil is actively developing regulations on digital assets. It is expected to be operational by the end of 2024.

The country’s authorities plan to launch a program to gradually introduce regulations on digital asset transactions. Initially, the Central Bank is implementing a plan to register crypto companies. They must obtain a license and enter a unique database of virtual service providers (VASP).

In the second phase, increased control over transactions with virtual currencies will begin. Particular attention will be paid to the supervision of stablecoins.

Mexican

In 2018, Mexico became the first Latin American country to begin regulating cryptocurrency exchanges and other platforms used for cryptocurrency transactions.

Chainalation experts say Mexico is now the second country in the world for cross-border crypto transactions. Approximately 61 billion dollars worth of assets are transferred annually, especially to the United States.

Regulatory updates regarding cryptocurrencies are needed in Mexico. But the country’s authorities are actively working on the digital peso.

“Industry participants will likely want to see whether this share will increase in the coming years for both Mexico and other Latin American countries with large remittance markets.”

Chain research

The editor aims to implement functions such as automation and programmability mechanisms with the help of the entity. In 2023, the Bank of Mexico postponed the timeline for the launch of the digital peso from 2024 to 2025.

sums up

Ripio CEO Sebastian Serrano admits that Latin America has become a development center for the global cryptocurrency market. Retail investors show the greatest interest in tokens. Companies are slowly switching to this tool, which allows the free movement of capital around the world.

Thus, the use of cryptocurrencies in Latin America will increase in the coming years. Brazilian importers are already using virtual currencies to pay Chinese suppliers of goods.