Different crypto use cases around the world foster divergent crypto markets

Different economic conditions around the world lead to the existence of two contrasting crypto markets – one resembling the original vision laid out over a decade ago, and the other driven by a more recent development.

Driving the news: The dollar and other currency-pegged stablecoins are proving their value in countries where the value of the local currency fluctuates from one day to the next. But the US and Canada’s “disproportionate embrace of DeFi” has led to a very different cryptocurrency market, according to a new report from research firm Chainalysis.

With the numbers: Crypto transactions in the Latin America region reached $562 billion in June 2022, up 40% from last year’s total, according to Chainalysis’ 2o22 Geography of Cryptocurrency report published Thursday. (Here’s last year’s.)

• People in the region seem to be reaching for crypto to store, send payments or seek alpha, the report said.

The other side: Where the storage of value and the sending of payments dominate the activity, crypto markets may develop differently than, for example, areas where decentralized finance is embraced.

• The US and Canada’s focus on DeFi has caused the market to behave differently than the rest of the world over the past year, Chainalysis found.
• This means that the swings have been wilder.

Details: Record high pocket inflation in Latin America and unstable local currency means that people in the region are using stablecoins for purchases or as a store of value, instead of, for example, keeping cash under mattresses and the like, says Chainalysis’ report.

There are country-specific trends to note:

Mexico’s largest exchange, Bitso, shows how big crypto payments can be.

• Bitso processed more than $1 billion in remittances from the US to Mexico in 2022 as of June, a 400% year-over-year growth and about 4% of Mexico’s remittance market, according to Chainalysis’ report.
• Note: America’s largest centralized exchange, Coinbase, which before the announcement of layoffs and curbing spending started a payments pilot program aimed at international growth.

Brazil is a rare place in Latin America where the dominant use of crypto is for speculative trading, Chainalysis said, citing Thomaz Fortes, the head of crypto at Nubank, one of the world’s largest digital banking platforms.

• “Customers want a way to increase their revenue,” Fortes said.
• Note: Nubank said this week that it is planning its own token; Warren Buffett’s Berkshire Hathaway is among the backers.

Argentina have embraced stablecoins, with USDT, USDC and USDD in Buenos Aires being popular – simply because they are pegged to the dollar, are digital and have no purchase limits.

• More than 31% of Argentina’s small retail crypto transaction volume comes from stablecoin sales, compared to just 26% of Brazil’s and 18% of Mexico’s, according to Chainalysis.
• Note: People there get paid in crypto, with a blockchain community developing there.

Be smart: Anecdotes from El Salvador make Nayib Bukele’s grand experiment with bitcoin look like a dud, but crypto adoption is taking hold elsewhere.

The bottom line: “Users in countries with weaker economies tend to rely on cryptocurrency for money transfers and, if inflation is high, for saving savings, while users in more developed markets such as Brazil treat cryptocurrency more as a speculative investment,” it says Chainalysis’ report.