Bitso’s $2 billion raise shows the power of crypto innovation in Latin America

• Bitso is Latin America’s leading crypto exchange, with over 4 million users spread over five nations.

• In Latin America, the firm hopes crypto can help with high inflation and devalued currencies.

• This article is part of “Master Your Crypto,” a series from Insider that helps investors improve their cryptocurrency skills and knowledge.

As you know, El Salvador has rolled out a crypto wallet for the country’s 6.5 million inhabitants. The digital wallet is powered in part by a startup in Mexico called Bitso, whose name is a portmanteau of bitcoin and peso. If you’re tracking the rise of crypto in Latin America, Bitso is the startup to watch.

Quantcast and Harvard Business School alumnus Daniel Vogel launched the crypto exchange in 2014, long before the market downturn of 2017 and this year confidence in cryptocurrencies around the world plummeted.

After Bitso secured seven funding rounds totaling $314 million in mid-2021, its valuation topped $2 billion, cementing the company as Latin America’s first crypto-unicorn, startup-speak to pass the $1 billion valuation mark. It allows users to trade different currencies using pesos, among other features including international money transfers.

“There is no doubt that Bitso paved the way for much of the crypto ecosystem in Latin America, starting before mainstream investors understood the potential of decentralized finance,” said Claire Diaz-Ortiz, an angel investor focused on Latin America at the firm VC3. to Insider.

While American crypto is a nice to have, it is a need to have in Latin America

Vogel sought to fill a hole in Mexico’s banking system, citing a significant number of unbanked citizens with little affordable access to financial mechanisms such as remittances.

Eight years later, Bitso is one of the only internationally regulated crypto platforms in Latin America, offering affordable payment options – the ability for migrants to send digital currency home – and 35 cryptocurrencies to its 4 million users in Mexico, El Salvador, Brazil, Colombia and Argentina.

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The latter three of these countries are among the 20 nations with the most crypto adoption, according to a 2021 report by blockchain data firm Chainalysis.

While crypto-disciples may be largely driven by ideology, Latin Americans may have immediate basic needs that digital currencies can help address, as the BBC noted in April.

Take Argentina, for example, whose past economic crises have sent citizens’ trust in financial institutions plummeting in recent decades. The country has an annual inflation rate of 61 percent, Bloomberg reported. The last US target, by comparison, was 9% – and that was a record thanks to supply chain problems and rising oil prices.

Bitso moved into Argentina in 2020. In that market, Diaz-Ortiz said, if you work for a foreign company that deposits your salary in a local bank, your dollar will be converted into pesos at about 130 pesos per dollar, instead for free market value of 300 pesos or more per dollar.
Crypto “is arguably a smarter choice than the Argentine peso,” she added.

Around 6 billion people worldwide are estimated to have a bank account, according to a 2021 report from the World Bank.

Worldwide, at least 2 billion people either lack a bank account or don’t have access to a full suite of banking tools, Diaz-Ortiz said, adding: “Most of these people live in countries with financial systems that look like nothing. United States and can benefit from decentralized financing solutions.”

But crypto probably isn’t the ultimate solution — especially as adequate adoption stalls, national debt balloons, and the industry remains rife with fraud and theft.

The Latin American market is not immune to crypto’s struggles

Chivo, the name of El Salvador’s digital wallet and slang for “cool”, was supposed to be an easy gateway to crypto for the country’s population and an integral step in the government’s experiment with a digital national currency.

But it saw lackluster usage from individuals and merchants, hacking issues and technical problems.

Sixty-one percent of Salvadorans abandoned the app after downloading and withdrawing the $30 sign-up bonus that came with it, according to an April report by the US National Bureau of Economic Research.

And like any crypto player, Bitso has faced chilly winds in the crypto winter. It laid off 80 of its 700 employees in May along with other Latin American crypto startups, citing the need to reassess skills.

Despite the shaky start, Diaz-Ortiz said Latin America was still ready for crypto adoption.

“Ultimately, the best solutions in decentralized finance will always come from entrepreneurs who experience these problems and use their resilience to innovate,” she said. That’s why Latin America is such a great place for web3 right now, she added.

This article is intended to provide general information designed to educate a broad segment of the public; it does not provide personalized investment, legal or other business and professional advice. Before taking any action, you should always consult your own financial, legal, tax, investment or other professional for advice on matters affecting you and/or your business.

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